Gold steady near 2-mth highs as N. Korea tensions continue

Andrew Cummings
August 12, 2017

Stock markets nosedived as investors continued moving into gold amid escalating political tensions between the United States and North Korea.

On Friday, stocks recovered slightly, with the S&P 500 and Dow Jones Industrial Average up 0.2%.

Japanese markets were closed for a holiday, but the tense mood dragged Asian shares lower and an MSCI index of stocks across the globe posted its largest weekly drop since the week before Donald Trump won the USA presidential election in November.

Trump continued to ramp up the rhetoric with a post on Twitter this morning indicating that the USA is prepared to take military action against North Korea.

But U.S. stocks regained some lost ground, despite Trump's comments Friday that U.S. weapons are "locked and loaded", ready to respond if North Korea acts "unwisely".


Many world stock markets have hit record or multi-year highs in recent weeks, leaving them vulnerable to a selloff, and the tensions over North Korea have proved to be the trigger. MSCI's broadest index of Asia-Pacific shares outside Japan .miapj0000pus closed 1.37 percent lower. Australia's S&P/ASX 200 edged down almost 0.1 percent to 5,760.90, while South Korea's Kospi fell 0.5 percent to 2,357.84.

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.

USA producer prices Thursday disappointed, as traders await consumer price inflation figures later Friday.

The U.S. dollar inched up against the Japanese yen and the Swiss Franc on Friday, erasing earlier losses, after Russian Foreign Minster Sergei Lavrov said there was a Russian-Chinese plan to defuse tensions between the United States and North Korea. "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.

Looking at currency movements during the Asian session, the yen continued strengthening against the dollar, with the pair trading below the 110 level at 109.96 ahead of European trading.


"There are four more (inflation) prints between now and the December FOMC meeting and we expect the Fed to remain data-dependent, if a touch more cautious", said TD Securities in a research note.

The yield on the 10-year Treasury bond fell to 2.2% and is approaching its lowest level of the year.

Gold, another classic safe haven asset, was trading at around US$1,285 per ounce, up more than two percent this week and near a nine-week high.

Crude oil prices fell on Thursday, on concerns of lingering global oversupply as Russian Federation considered a future output resumption and OPEC boosted its July production numbers.

Gold futures for December delivery on the Comex division of the New York Mercantile Exchange rose $3.40, or 0.26%, to $1,293.37 a troy ounce.


The dollar index was up 0.15% to 93.68 as both the euro and sterling weakened against the greenback. "Indeed, the biggest increases in the price of gold have occurred when the U.S. bombed Libya in 1986, in the wake of the Gulf War in 1990, and, more recently, when ISIS attacks put oil supplies in the Middle East at risk".

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