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Gold jumps to 10-month high after North Korea nuclear test

US gold futures for December delivery were up 0.6 percent at $1,338.60

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Reuters
Last Updated : Sep 04 2017 | 1:20 PM IST

Gold prices hit their highest in nearly 10 months on Monday after North Korea's latest and most powerful nuclear test drove investors towards safe-haven assets.

Spot gold rose 0.7 percent to $1,333.28 per ounce by 0329 GMT, earlier touching its best since Nov. 9 at $1,336.79.

U.S. gold futures for December delivery were up 0.6 percent at $1,338.60.

"What dominates the market is really the geopolitical tensions right now, either in North Korea or in the United States," said Mark To, head of research at Hong Kong's Wing Fung Financial Group.

North Korea on Sunday conducted its sixth nuclear test, of what it said was an advanced hydrogen bomb, prompting the threat of a "massive" military response from the United States if it or its allies were threatened.

The Japanese yen and sovereign bonds also climbed on Monday as North Korea's nuclear test provoked a knee-jerk shift to safe havens, though equity losses were modest.

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Adding to tensions, Russia on Sunday denounced the closure of three Russian diplomatic facilities in the United States as a "blatantly hostile act" that violated international law and demanded Washington reverse the order.

"The support level (for gold) at $1,300 should be rather robust at this moment and because of the need for risk-aversion $1,375 should be possible as a price range," To said.

"Another plus for gold is that we don't see an immediate rate hike and the shrinkage of the Federal Reserve's balance sheet."

On Friday, after a U.S. government report showed employers added fewer jobs in August than expected, traders held to expectations that the Federal Reserve would wait until the middle of 2018 before raising rates.

Higher interest rates tend to boost the dollar and push bond yields up, putting pressure on gold prices by increasing the opportunity cost of holding non-yielding bullion.

Investors were also looking ahead to a European Central Bank (ECB) meeting on Thursday.

Markets are expecting no policy change from the ECB this month but the bank is likely to announce a reduction of its monthly asset purchases in October, according to a majority of economists in a Reuters poll.

Spot gold may gain more to $1,345 per ounce, as it has pierced a resistance at $1,333, Reuters technical analyst Wang Tao said.

Silver rose 0.8 percent to $17.83 an ounce, earlier touching the highest since late April at $17.90 an ounce.

Platinum gained 0.2 percent to $1,006.60. It had earlier marked its best since early March at $1,014.70.

Palladium added 0.5 percent at $984.97, after earlier reaching its highest since February 2001 at $992.85.

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First Published: Sep 04 2017 | 1:20 PM IST

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