Gold buoyed as hedge fund titan sees leaders ‘playing chicken’

SINGAPORE: Gold advanced to the highest in two months as the spike in tensions between the United States and North Korea fanned demand, with hedge fund billionaire Ray Dalio flagging rising risks, including “two confrontational, nationalistic, and militaristic leaders playing chicken with each other.”

Bullion for immediate delivery rose as much as 0.2% to US$1,289.07 an ounce, the highest level since June 7, and traded at US$1,287.71 in London, according to Bloomberg generic pricing. The metal is up 2.3% this week, and 12% in 2017. Miners’ shares rose.

Gold is among the top performing commodities this year as investors weigh geopolitical risks, as well as a weaker dollar. President Donald Trump intensified warnings to North Korea this week, promising a massive response to any strike against the United States or its allies, boosting haven demand. Dalio, who manages Bridgewater Associates, said emerging risks were more political than economic, which made them challenging to price, according to a LinkedIn post.

“Gold remains in demand as a safe haven and is still on the up,” analysts at Commerzbank AG including Eugen Weinberg wrote in a note.

Investors will be closely watching Friday’s consumer price data in the United States to get further clues on the outlook for the Federal Reserve’s monetary policy. On Thursday, New York Fed president William Dudley cautioned that it would “take some time” for inflation to reach the central bank’s 2% target, the latest official warning that price pressures remain muted.

In his post – which was decorated with a photo of a gathering storm – Dalio recommends investors consider placing 5% to 10% of their assets in gold as a hedge against political and economic risks.

In addition to the North Korean situation, Dalio also wrote that he sees rising odds of Congress failing to increase the US debt ceiling, leading to a technical default.

As Trump and Kim Jong Un trade barbs, Dalio wrote that “the world is watching to see which one will be caught bluffing, or if there will be a hellacious war.”

He added: “When it comes to assessing political matters (especially global geopolitics like the North Korea matter), we are very humble. We know that we don’t have a unique insight that we’d choose to bet on.”

Gold miners are benefiting from the jump in prices. The FTSE/JSE Africa Gold Mining Index rose 2.6%, its third day of gains. AngloGold Ashanti Ltd and Harmony Gold Mining Co Ltd. rose more than 3%.

In other precious metals:

Spot silver rose 0.1% to US$17.14 per ounce, on course for a 5.3% weekly gain, the biggest advance in a year. Platinum gained 0.1% to US$983.02 per ounce, extending the longest run of weekly gains in a year. Palladium was flat at US$899.90/oz, and is up 2.5% this week. — Bloomberg