Gold seen topping $US1350 an ounce on US, North Korea tensions

Andrew Cummings
August 13, 2017

Market jitters from the escalating geopolitical tensions between the U.S. and North Korea have brought Gold back into fashion this week, with the yellow metal hitting a fresh two-month high above $1288, during early hours on Friday. Reuters data show a 28-percent chance for a hike after the Fed's December meeting. Platinum also moved up 0.8% to $979.85, while palladium moved up a percentage point to $900.30.

"There is a rhetorical war between the two nations, and traders (as are most human beings) are nervous", said Chris Weston, chief market strategist at IG, in a note to clients.

"What has changed this time is that the scary threats and war of words between the USA and North Korea have intensified to the point that markets can't ignore it", said Shane Oliver, head of investment strategy at AMP Capital in Sydney.

Global benchmark Brent also fell 0.9 percent to $51.44, after Thursday's 1.5 percent drop.

The pan-European FTSEurofirst 300 index (.FTEU3) lost 1.11 percent.


South Korea's KOSPI fell 1.7 percent to its lowest since May 24, but its losses for the week are a relatively modest 3.2 percent.

The yen is perceived as a safe haven because Japan is the world's biggest creditor country and investors there have tended to repatriate funds in times of crisis. Early Friday, the ICE Dollar Index was up just 0.04% to 93.437.

Below that level lies another key support level for the dollar on technical charts at 108.13 yen, a trough the greenback touched in mid-April.

"We're not very oversold yet so the market still has more downside left to it", said Robert Pavlik, chief market strategist at Boston Private Wealth in NY.

And in bond markets, 10-year U.S. Treasuries and Germany's ultra-safe government bonds, known as Bunds, were trading at their highest prices since June.


Damage for the week: The days of verbal sparring between Washington and Pyongyang looks set to bruise weekly performances for the major US indexes.

The trade deficit narrowed in June from the previous month and imports fell 2.5 percent from a year earlier.

Separately Capital Economics' Simona Gambarini overnight said the recent rise in geopolitical risk could lift the price of gold "beyond $US1350 an ounce", which would be the first time it has topped that level since the UK Brexit referendum in mid 2016.

US crude (CLc1) was unchanged at $48.59 per barrel and Brent (LCOc1) was last at $51.84, down 1.63 percent on the day.

Disappointing economic data releases weighed on both sides of the Atlantic today with a negative goods trade balance for the United Kingdom (-0.1% versus expectations of 1.4%), higher unemployment claims from the USA (244,000) and also a negative month-on-month PPI figure for the U.S. (-0.1%). They plunged 2 percent on Thursday on fears of slowing demand and lingering concerns over a global oversupply.


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