Gold prices extended their gains on Tuesday, trading at the highest level in almost a year as a North Korean missile launch over Japan’s airspace rekindled geopolitical tensions in the region and sparked a flight to haven assets.
Gold for December delivery rose $9.70, or 0.7%, to $1,325 an ounce, setting it on track for its highest settlement value since late September last year. A popular exchange-traded fund, the SPDR Gold Shares ETF tacked on 0.6%, while those for gold miners, the VanEck Vectors Gold Miners ETF, climbed 0.5%.
The advance came after North Korea fired a ballistic missile across northern Japan, in what Japanese Prime Minister Shinzo Abe called an
“unprecedented, grave and serious threat that seriously damages peace and security in the region.”
Tensions between Pyongyang and the U.S. and its allies — including Japan — have been running high most of the summer, stoking fears of a potential nuclear clash. President Donald Trump has previously said the U.S. would react with
“fire and fury” if Pyongyang stepped up threats against the U.S. and its allies.
“There is increasing expectations for President Trump to counter react to the North Korean aggression, which may further propel the prices upwards,” said Mihir Kapadia, CEO at Sun Global Investments, in a note.
Gold prices had already kicked off the week with sharp gains Monday as the dollar slumped amid Hurricane Harvey’s destruction in Texas. The greenback added to its fall on Tuesday, with the ICE Dollar index a gauge of the buck against a half-dozen currencies, down 0.3% to 91.95, around its lowest level since January 2015. A weaker greenback tends to boost commodities tied to the currency such as gold, as it becomes cheaper to buy for other currency holders.
The dollar has been hit hard recently, falling sharply Friday after Janet Yellen, the Federal Reserve Chairwoman,
“remained tight-lipped about the future path of U.S. monetary policy at the Jackson Hole Symposium,” said Fawad Razaqzada, technical analyst at Forex.com.
“This triggered speculation that the Fed may delay raising rates again until next year,” he said. Also,
“if the economic costs of Hurricane Harvey… turn out to be unexpectedly high, then the Fed may have to be even more patient in normalizing monetary policy.”
“This is good news for gold, for not only is it benefiting from the current “risk-off” trade but a weaker dollar too,” said Razaqzada.
Meanwhile, Hussein Sayed, chief market strategist at FXTM, pointed out that much of gold’s gains this week so far occurred before the missile launch,
“meaning that there are different factors supporting prices” for gold.
U.S. 10-year Treasury bond yields have been falling since July 10, with total declines of 10.8%, he said in a note.
“This partially explains gold’s 8.6% surge since then, and investors are still not buying Trump’s tax reforms.”
Among other metals Tuesday, December silver added 13.6 cents, or 0.8%, to $17.665 an ounce, extending a gain of 2.3% from Monday. October platinum traded up $14.60, or 1.5%, at $1,003.70 an ounce, looking to settle above $1,000 for the first time since March, while December rose $8.10, or 0.9%, to $940.45 an ounce, continuing to trade at levels not see since 2001.