Article Highlights

  • N.Korea says considering missile strike on Guam
  • Swiss franc surges 0.6 percent against the dollar
  • Platinum hovers near 3-1/2-month high
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Gold prices rose on Wednesday after North Korea said it is considering an attack on the U.S. Pacific territory of Guam, with President Donald Trump warning Pyongyang that any threat to the United States would be met with “fire and fury.”

The tensions rattled through global markets, sending investors out of equities and into the safety of the yen, Swiss franc, and government debt. The VIX “fear gauge” of expected volatility on the S&P 500 hit a near month high on Tuesday.

“The market hates uncertainty and that’s certainly what we have now,” said Ole Hansen, head of commodity strategy at Saxo Bank.

“But looking ahead, unless we start to see a conflict break out or a major stock market correction, (gold) is capped at 1,295 (although) the upside at the moment is the favored direction.”

Spot gold had risen 0.8 percent to $1,270.49 per ounce by 1215 GMT, while U.S. gold futures for December delivery gained 1.1 percent to $1,276.50 per ounce.

Gold hit a two-week low on Tuesday after U.S. jobs data came in better than expected and the dollar turned positive, while investors awaited U.S. inflation figures later this week for further clues about the pace of interest rate rises.

A strong dollar makes dollar-priced gold costlier for non-U.S. investors while rising interest rates increase the opportunity cost of holding non-yielding bullion.

“We’ve had some competing forces play out over the past 12 hours – the U.S. dollar was stronger off economic data, but that was quickly reversed with President Trump’s comments about North Korea,” ANZ analyst Daniel Hynes said.

“I think (the North Korea situation) is going to continue to provide a little bit of support, but not enough to push prices significantly higher from here,” he added.

The dollar was flat against a basket of currencies but down 0.6 percent against the Swiss franc, a traditional safe haven.

“We believe continued saber-rattling between the (U.S. and North Korea) could take gold prices higher still. There is genuine concern, hence the fall in the dollar (but) as ever with Trump, it’s unclear how quickly the rest of the U.S. machinery will calm him, so rises are not yet huge,” said Nitesh Shah, director at ETF Securities.

Platinum gained 0.6 percent to $972.95 per ounce, having hit its highest since April at $979.

Silver rose 1.7 percent to $16.70 per ounce, while palladium fell 0.6 percent to $893.