This week, gold approached but failed to eclipse the $1,300 mark. Today, as the dollar bounced back slightly, the yellow metal fell to a one-week low. The failure to surpass the psychologically important round number likely spurred some profit taking. Still, with tensions over North Korea persisting and the French national election happening this weekend, gold may still see some renewed buying interest.

On North Korea, while it’s likely China wants Kim Jong Un to stay in power as a chess piece against the U.S. and the U.S.-backed South Korea, we believe that China understands that full-blown war on the Korean Peninsula is not in its interest. Thus, despite the saber rattling, we believe it’s likely in the short term that the situation will stay in control. If China were to play the key role to get North Korea to behave, it would likely boost its standing in South Korea as well.

However, given Kim’s penchant push the envelope and his likely knowledge that China does not want to weaken him too much for China’s own political interests, the situation could become tenser before it cools down, if it cools down.  

On the French election, Marine Le Pen, who pledges to pull France out of the euro zone and, possibly, the European Union, if elected, is very much in the running to win enough votes on Sunday to make it into a run off. If no candidate wins majority (very likely since polls show no candidate currently even has one quarter of the votes), then the top-two vote-getters will square off in a second vote on May 7.

The latest polls show a tight four-way race, with only slightly more than 3 percentage points separating poll leader Emmanuel Macron from fourth-place Jean-Luc Melenchon. Le Pen sits a close second behind Macron, but is also close enough to the third and fourth place candidates that she may not make the run off.   

Even if Le Pen makes the run off, it’s expected that she would lose the second round of votes, but recent history teaches us that votes don’t always turn out as polls predict.

We don’t think the market has adequately discounted the risk of a Le Pen victory. Especially with the market overbought, we think it prudent to keep the SPDR S&P 500 ETF (SPY) June 220 put open as an ongoing hedge against the stock market. This is not an indicator-driven trade as our stock indicator is right on the boundary between “0” and “-1.”

Our gold stock indicator has fell into “-2” territory overnight. However, with the steep drop in GDX today, which pushed the price of the put options higher, we decided to monitor how the indicator moves a little longer before possibly pulling the trigger on buying a put.   

Our stock indicator, as noted above, continues to teeter on the edge of neutral and bearish, and our gold indicator has turned slightly bearish. Our other indicators, meanwhile, remain neutral.
 

Besides the options, we currently hold open (long) positions in the following stocks: NovaGold (NG), Gabriel Resources (GBRRF), Schlumberger (SLB) and Trilogy Metals (TMQ).