Gold buoyed by North Korea tensions, U.S. inflation data

Henrietta Brewer
August 12, 2017

Traditional safe-haven currencies including the Swiss franc and Japanese yen rose on Wednesday, boosted by worries about increased tensions between the United States and North Korea.

The S&P/TSX composite index fell 143.08 points to 15,074.25, with almost all of its sectors moving lower.

Insurers and banks, which invest in higher-yielding products such as foreign bonds, underperformed after U.S. Treasury yields fell on Wednesday, with the yields on the benchmark 10-year note hitting a six-week low.

A Reuters Datastream index of more than 7,000 stocks across the globe saw its market capitalisation drop from a record high US$61.36 trillion on Monday to US$60.43 trillion at the close on Thursday.

"Of course it's all come at a time when share markets are due for a correction so North Korea has provided a flawless trigger".

SIMMERING TENSIONS: North Korea revealed on Thursday a detailed plan to launch a salvo of ballistic missiles toward the U.S. Pacific territory of Guam, a major military hub and home to U.S. bombers.


The dollar last changed hands at 108.96 yen, down 0.2 percent. While the German DAX Index closed just below the unchanged line, the UK's FTSE 100 Index and the French CAC 40 Index both tumbled by 1.1%. "If you look at the gold price after the CPI (inflation) data, it tells you that the Fed is not going to be in any rush to increase the interest rate this year", said Naeem Aslam, chief market analyst at Think Markets. Hong Kong's Hang Seng Index plunged by 2%, while South Korea's Kospi Index slumped by 1.7%.

The modest rebound came at the end of a turbulent week on Wall Street as escalating tensions between the US and North Korea rattled global markets.

The dollar index slipped to a one-week low on Friday after the USA data.

Although Japan could be in the front line of any clash with North Korea, the yen is benefiting because Japan is the world's biggest creditor nation and Japanese investors tend to repatriate funds in times of stress, attracting other flows.

"If the data continues to come in on the softer side, the market might start to price the Fed staying on hold this year", said Sireen Harajli, FX strategist at Mizuho in NY.

The Korean won also continued to skid, sliding 0.4 percent to 1,146.2, below its 200-day moving average. The data suggested little sign of inflationary pressure within the economy.


"The level which we are looking at now is $1,300".

METALS: Gold added $10.80, or 0.8 per cent, to settle at $1,290.10 an ounce.

The greenback also came under pressure after New York Federal Reserve President William Dudley cautioned it would "take some time" for U.S. inflation to reach the bank's two percent target, the latest warning price pressures remain muted.

Ongoing global glut concerns lingered in oil markets despite a bigger-than-expected draw in US crude inventories, leaving prices volatile.

The price of crude oil dropped more than two percent Thursday, the cost of a barrel falling to $48.49.


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