Published: Fri, August 11, 2017
Sport | By Gary Shelton

Gold settles at 2-month high amid geopolitical tensions

Gold settles at 2-month high amid geopolitical tensions

"North Korea is being used as a reason to sell Japanese stocks, just as it was used yesterday in the USA", said Soichiro Monji from Daiwa SB Investments in Tokyo. Geopolitical tension persists after a North Korean army commander said "sound dialogue is not possible" with U.S. President Donald Trump and "only absolute force can work on him", according to state media.

Crude oil prices tumbled on the back of the selloff on Wall Street and lingering concerns over global oversupply.

Risk sentiment receded, driving down U.S. Treasury yields which in turn weighed on the dollar.

The unease about the relationship between the USA and North Korea was more prominent in other markets, several market strategists said.

On Wednesday, North Korea's military said it is considering missile strikes near the USA territory of Guam, warning that it is ready to stage an all-out war if Washington launches a preventive war against it.

But other believe North Korea has no intention of backing down. The index dropped -1.3% overnight, the weakest closing level since May 31, but defence equipment makers attracted buyers. Each fell at least 1.4%.

The initial reaction to President Trump's bellicose statement about unleashing "fire and fury like the world has never seen" against North Korea was subdued on Tuesday afternoon.

Sterling was last trading at $1.2986, down 0.35 percent on the day.

The outlier was Australia's S&P/ASX 200 Index resisted the region-wide downward trend to add +0.4%.

The CBOE Volatility Index, a barometer of expected near-term stock market volatility, closed at its highest since the election.

In Europe, regional bourses have opened down and have continued in the same direction ahead of the open stateside. It was gold's highest settlement since June 7. Defense and home improvement stocks were among the day's risers while travel & tourism and consumer electronics lagged.

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The S&P 500 volatility index, a measure of investor fear, rose for a second day. Brent crude edged down by 0.13 percent to trade at $51.82 a barrel and US crude shed 0.06 percent to trade at $48.56. Brent crude was up 80 cents at $53.50 a barrel and USA crude was up 60 cents and back up to $50.

The market will takes its cue from today's EIA report (10:30 am EDT) to see whether it confirms the yesterday's API release. The drop was greater than an expected 2.37 million barrels.

Note: OPEC in Abu Dhabi this week in an effort to boost producers' adherence to the supply cuts. Gold hit a two-month high of $1,278 an ounce amid the nervousness. The Japanese currency is often a safe have asset too.

In currency markets, the Canadian dollar was trading at an average price of 78.71 cents United States, down 0.20 of a USA cent.

In the U.K, issuance of new Gilts is scheduled to resume August 23.

Demand for the Japanese yen remained supported, with the dollar extending losses made in the Thursday session.

The yield on the 10-year Treasury bond fell to 2.2% and is approaching its lowest level of the year.

The Swiss franc rose 0.01 percent versus the greenback, the most since late June, at 0.96 per dollar.

Steel and copper prices stayed strong in metals markets.

"Our financial results came in well below our expectations", Scozzafava noted.

Analyst Mike Van Dulken at Accendo Markets said most safe havens assets remained on the front foot, "but this is not necessarily at the expense of all risk assets, with oil approaching is best levels for August following yesterday's U.S. inventory data (big crude drawdown), Copper flat around recent 2yr highs and iron ore off its lows".

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