Gold near one -year high, buoyed by Korea tensions, lower dollar


  • Economy
  • Wednesday, 06 Sep 2017

Gold bullion is displayed at Hatton Garden Metals precious metal dealers in London, Britain July 21, 2015. Gold was on the brink of five year lows on Tuesday, with more losses expected in the coming months following Monday's "bear raid" when sellers dumped an estimated 33 tonnes in just two minutes. REUTERS/Neil Hall

LONDON: Gold held near one-year highs on Wednesday, boosted by tensions on the Korean peninsula and a lower dollar due to growing expectations the Federal Reserve will delay rate rises.

Spot gold was unchanged at $1,338.30 an ounce at 1054 GMT, a gain of around 8 percent so far this quarter and more than 16 percent so far this year. 

It touched $1,344.21 an ounce on Tuesday.

US gold futures were down 0.1 percent at $1,343.40 an ounce. 
    
"Rising geopolitical tensions, the hurricane hitting the U.S. and the looming debt ceiling are increasing demand for safe assets," said Danske Bank analyst Jens Pederson.

"These extraordinary factors are also weakening the dollar from the point of view that the Fed may further postpone normalisation of monetary policy, which would be good news as it would keep a lid on U.S. yields."

Both U.S. government bonds and gold are seen as risk-free by investors. Low U.S. Treasury bond yields mean there is little opportunity cost in holding gold, which earns nothing and costs money to insure and store.

Analysts say low U.S. yields mean investors are unlikely to buy Treasuries, which would also weigh on the dollar.

A lower U.S. currency makes dollar-denominated gold cheaper for holders of other currencies, which could boost demand.

A potential standoff over the U.S. federal debt ceiling has raised alarm bells among investors who fear a repeat of 2011 when a prolonged showdown over increasing the borrowing limit and subsequent downgrade of U.S. credit quality led to slump in the S&P 500 stock index.

Investor unease was reinforced after a North Korean diplomat warned his country is ready to send "more gift packages" to the United States as world powers struggled for a response to Pyongyang's latest nuclear weapons test.

"The concern now is that another launch could take place on Sept 9, which is the (North Korea's) Independence Day," said INTL FCStone analyst Edward Meir.

"Gold is likely to move higher over the course of September, sustained by a weaker dollar and North Korean tensions...Any further wobbles in US equities could provide further support and perhaps nudge it towards our $1390 price target."

Technical resistance is at $1,352, near the high from last September, followed by $1,376, the upper Bollinger band on the monthly charts. But the momentum indicator near zero suggests gold may be in for a period of consolidation.

Elsewhere silver gained 0.3 percent to $17.95, platinum rose 0.3 percent to $1,009.00 and palladium added 0.4 percent to $962.05 an ounce. - Reuters
 
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