Investors rush to gold following rising North Korea tensions

13 August, 2017, 11:09 | Author: Terri Saunders
  • Could a North Korean Missile Launch Send Gold Soaring Later This Year

Stock markets took the brunt of risk-averse trading on Wednesday after an overnight escalation of tensions between the U.S. and North Korea forced investors into haven assets such as gold, Treasuries and the Swiss franc.

Tokyo's benchmark Nikkei 225 index was flat, slipping 0.01 percent, or 1.99 points, to sit at 19,736.72 by the break while the Topix index of all first-section issues fell 0.13 percent, or 2.04 points, to 1,615.86.

Crude oil futures are slipping USD0.10 to USD48.49 a barrel after tumbling USD0.97 to USD48.59 a barrel on Thursday.

Rising geopolitical tensions were heightened further when U.S. President Donald Trump warned Pyongyang it should be "very, very nervous" if it even thinks about attacking the United States or its allies, after Pyongyang said it was making plans to fire missiles over Japan to land near the U.S. Pacific territory of Guam. Japan was closed on a public holiday.

The latest COT positioning data will be watched closely in late USA trading on Friday, although overall risk conditions are likely to remain the dominant short-term influence on gold prices.

The sell off in stocks and flight to safety gathered pace in early European trade as the already cool relationship between the U.S. and North Korea turned icy following hard-nosed rhetoric from both nations.

The Japanese currency last traded at 109.07 yen to the dollar, compared to levels around the 110 handle seen earlier in the week.

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The FTSE 100 Index closed down 79.98 points to 7,309.96, with President Donald Trump tweeting that the United States military is "locked and loaded" as he warned North Korea over its continuing threats.

Australian shares fell to near three-week lows in a broad-based selloff. Hong Kong's Hang Seng Index dropped 1.69%, while mainland markets saw the Shanghai Composite dip 1.04%.

The market's main backstop in times of strain, gold, hit a two-month high of $1,282 an ounce amid the nervousness. They are expected to cut North Korea's export revenues by one third.

The pan-European STOXX 600 was down 0.7% at closing, France's CAC 40 fell 1.4% after a vehicle hit a group of soldiers in Paris in what is thought to have been a deliberate act, and a fall in bond yields saw Germany's DAX down 1.1%. July's 0.1 percent increase in consumer prices suggests that the Federal Reserve may be less likely to raise interest rates next month.

Oil also regained momentum as data pointed to declining US inventories.

On the other hand, shares of Nordstrom (JWN) may see early strength after the department store operator reported second quarter results that beat estimates on both the top and bottom lines.

Insurers and banks, which invest in higher-yielding products such as foreign bonds, underperformed after U.S. Treasury yields fell on Wednesday, with the yields on the benchmark 10-year note hitting a six-week low.

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