Gold prices rose early Wednesday amid rising tensions between the United States and North Korea after the North responded to warnings from U.S. President Donald Trump with a threat to strike the U.S. territory of Guam.
“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 earlier today (Wednesday),” said ANZ analyst Daniel Hynes.
Spot gold rose 0.3 percent to $1,264.50 per ounce at 0324 GMT, while U.S. gold futures for December delivery rose 0.6 percent to $1,270.40 per ounce.
Pyongyang said on Wednesday it was considering plans for a missile strike on the U.S. Pacific territory of Guam, just hours after Trump said North Korea would face “fire and fury” if it threatens the United States, his strongest warning yet for North.
“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,” said Hynes.
Asian shares and U.S. stock futures slipped while U.S. Treasuries, gold and the safe-haven yen rose in early Asian trading on Wednesday after tensions on the Korean peninsula escalated. On Tuesday, stronger-than-expected U.S. jobs data from the Labor Department weighed on gold, dragging prices to the lowest since July 26 at $1,251.01 an ounce.
“The weakness in gold abruptly ended later in the day as stocks turned south after President Trump issued a rather stern warning to the North Koreans,” said INTL FCStone analyst, Edward Meir.
Geopolitical risks can boost demand for safe haven assets such as gold.
“We likely will continue to see more tension in the region (Korean Peninsula),” Meir noted.
“This in turn suggests that at least for the balance of this week, we likely should be long gold as the heated rhetoric could raise the odds of military action.”
Investors are also awaiting U.S. inflation data due later this week for clues on when the U.S. Federal Reserve would begin reducing its $4.2 trillion bond portfolio.
In other precious metals, silver rose 0.4 percent to $16.48 per ounce.
Platinum gained 0.7 percent to $973.40 per ounce after hitting its highest since April 21 in the previous session.
Palladium fell 0.2 percent to $895.30 per ounce.