Published: Sun, August 13, 2017
Economy | By Guillermo Lane

Gold hits two-month high on Trump, North Korea war of words

UN Secretary-General Antonio Guterres said he was deeply concerned about the tensions on the Korean Peninsula and was "troubled" by the increase in confrontational rhetoric.

USA producer prices unexpectedly fell in July, pointing to a further moderation in inflation that could delay a Federal Reserve interest rate increase. The Nasdaq composite fell 45 points, or 0.7 percent, to 6,324.

Some fear the key price index may sink below the psychologically important 2,300-point level on foreign investors' massive profit-taking, the so-called North Korea risk and other unfavorable factors.

USA gold futures for December delivery rose 0.8 percent to $1,272.00 per ounce.

The rise in geopolitical tensions this week, which heightened after U.S. President Donald Trump on Tuesday warned North Korea that it would face "fire and fury" if it threatened the United States, has drawn investor attention away from second-quarter corporate earnings season, which is winding down. The tech-heavy Nasdaq composite lost 2.1 percent to 6,216.87.

KOSPI closed 0.38 percent down at 2,359.47 on Thursday, but it fell to 2,339.06 at one point, hovering below the 2,340-point level for the first time in more than two months. The price rose 1.3 percent in the previous session, the biggest gain since mid-May. Japan is the world's biggest creditor country and there is an assumption investors there will repatriate funds in a crisis. "But looking ahead, unless we start to see a conflict breakout or a major stock market correction, (gold) is capped at $1,295, (although) the upside at the moment is the favoured direction".

Risk sentiment soured in the financial markets to drive U.S. Treasury yields down and in turn weigh on the dollar.

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"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. Against the yen, the euro last traded at 128.29 yen, down 0.2 percent.

Disappointing earnings also helped pull the market lower Wednesday. Natural gas jumped 10 cents, or 3.5 percent, to $2.99 per 1,000 cubic feet.

The dollar was testing the 109 yen barrier in morning forex trade, while gold, another classic safe haven asset, was trading at around $1,285 per ounce, up more than two percent this week.

"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", TD Securities said in a research note.

A broader measure of the dollar, the ICE Dollar index, which compares the buck to six rivals, was trading at 93.6450 compared with 93.7170 before the jobless claims release. Biotech companies Celgene and Amgen lost 3.8 percent and 2.6 percent, respectively.

Despite its recent weakening, the New Zealand dollar is still up more than 5 percent this year, setting a 26-month high of $0.7557 in July. The Korea tensions though have seen both USA and European markets this week push back expectations of when the Fed and ECB might hike interest rates.

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