Gold prices (XAUUSD) rise on news of Russia-North Korea defense deal

North Korea and Russia have announced a new agreement promising mutual assistance if either nation comes under attack.

This pact was revealed during a summit in Pyongyang on Wednesday, North Korea, marking Russian President Vladimir Putin’s rare diplomatic visit to the reclusive nation.

Putin met with North Korean leader Kim Jong Un, in what is their first official agreement since the Cold War era.

What the Russia-North Korea pact says?

The pact states:

If either side faces an armed invasion and is in a state of war, the other side will immediately use all available means to provide military and other assistance, in accordance with Article 51 of the UN Charter and the laws of each country.

The vague wording, especially the term “other assistance,” has sparked widespread concern, impacting both headlines and financial markets.

While the wording of the deal was left deliberately vague, the news – arguably the wording of ‘other assistance’ in particular – rocked both headlines and financial markets.

What the UN says?

The United Nations Charter states in its Article 51 that:

“Nothing in the present Charter shall impair the inherent right of individual or collective self-defense if an armed attack occurs against a Member of the United Nations, until the Security Council has taken measures necessary to maintain international peace and security.”

How does this impact gold?

The precious metal enjoyed a strong trading day since the news of Russia-North Korea deal came out, and has started off today strong as well.

Gold (XAUUSD) was up by more than 0.65% in pre-market trading at around $2343.41 per troy ounce, at the time of writing.

This was up from a previous close of $2,328.31 yesterday.

The movements are unsurprising, as gold typically enjoys spikes in price in the face of geopolitical uncertainty or tensions escalating on a global scale. The commodity also has the added boost of uncertainty as to when the Fed will begin rate cuts in the United States.

The XAUUSD price has gained almost 14% this year to date so far, and close to 2% so far in the past week.

Analysts bullish on gold

“Gold ended in positive territory yesterday after succumbing to an early bout of selling pressure,” commented Fineqia analyst David Morrison, who shared his views with Invezz on gold’s prospects.

“This was a good outcome for the metal, and recent moves are looking quite constructive,” he concluded.

Gold technical analysis

According to Morrison:

“Earlier this month, gold sold off sharply, and briefly broke under an area of support around $2,300. Since then, there haven’t been any dramatic moves to the upside – but gold has held above support and has managed to grind higher.”

Morrison noted that the precious metal is not out of the woods yet, saying that “the daily MACD has pulled back sharply from the ‘overbought’ conditions of a month ago, and is now in ‘neutral’ territory.”

However, he adds that momentum is to the upside for the XAUUSD:

The daily MACD has continued to flatten out just below the ‘neutral’ level, while the 4-hour MACD shows a build of upside momentum. The 4-hour MACD is indicating that upside momentum is building and that must also offer the bulls some encouragement. It’s certainly one to watch.”

“But as we’ve seen recently, the metal has been subject to some vicious sell-offs, so must be handled with care,” he concludes.

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