Gold Prices Hit 2-Month Highs, Defensive Demand Continues

12 August, 2017, 00:50 | Author: Terri Saunders
  • Gold Prices Hit 2-Month Highs, Defensive Demand Continues

A Chinese state-run newspaper said on Friday that China should make clear that it will stay neutral if North Korea launches an attack that threatens the United States, but that if the US attacks first and tries to overthrow North Korea's government, China will prevent it doing so.

Gold prices continued to rise after North Korea state media warned its missiles could surround the U.S. territory of Guam in an "enveloping fire" in coming weeks. We would like to recommend buying gold at the current price and more so at correction. "The North Korea situation appears to be the culprit".

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%). It since drifted back towards the $1.17 level before being pushed up by weak United States data. The news drove investors out of risky assets and into safe-haven assets like gold, U.S. Treasurys and the Japanese Yen. Retail sales through credit cards in New Zealand disappointed as the July figure grew only 2% annually, down from 4.5% in the prior month.

The pound benefited from the euro's weakness via euro/pound cross flows, and was additionally supported by positive United Kingdom data released earlier in the day.

On Thursday the greenback had shed 0.8 percent versus the yen, with the Japanese currency rallying broadly against most major currencies. Disappointment around worse French monthly industrial production in June added negative pressure to the euro.

The yen gained more than 0.2 percent in Asian time as investors took their money out of higher-yielding currency plays following another warning from President Donald Trump to Pyongyang.

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Sterling slid against the dollar below the $1.3000 mark.

Spot gold prices were unchanged at $1,286.27 a ounce, after touching a two-month high earlier. The greenback faced fresh downside pressure after USA producer prices declined the most in 11 months in July.

Sept. WTI oil up 23 cents, or 0.5%, for the session to settle at $48.82/bbl, but were down 1.5% this week.

"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.

Australian shares were down 1.3 percent, set for a weekly loss of 0.6 percent and Chinese and Hong Kong bluechips lost 1.6 percent and 1.9 percent respectively.

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