Gold price steady as North Korea crisis continues

The dollar has bounced back from a two and a half year low amid beliefs that geopolitical tensions from North Korea have plateaued, but the gold price remains stable owing to widespread belief that the conflict will continue for the foreseeable future.

Spot gold fell 0.1% to $1,307.60 by 07:00 this morning. Yesterday saw it reach peak of $1,325.94, which hasn’t been seen in just over a nine months. The dollar index, which measures the greenback’s value against a basket of currencies, was up at 92.52 compared to yesterday’s close of 92.33.

The dollar’s rebound came after wall street closed on a stronger performance, and escalating tensions with North Korea appeared to be more constructive. The US ambassador to the United Nations Nikki Haley (pictured above) said yesterday that “we are going to talk about what else is left to do,” providing a sense of normalcy to those concerned the situation is spiralling out of control, compared to the posturing that has characterised the conflict so far.

According to Brian Lan, managing director at dealer GoldSilver Central in Singapore, the lack of vocal and reasoned response from state representatives was giving credence to those who suspect markets are not currently being reassured. “A lot of people are still seeing gold as a safe haven because we have not heard much in terms of reactions of the different countries to North Korea’s action”, he said.

Despite these words of comfort, the situation appears to be ongoing, which boosts gold’s safe haven appeal.

However, gold’s status as the safe haven of choice is being challenged by the rise of cryptocurrencies and unconventional monetary policy, which has “decoupled asset prices from underlying fundamentals”, according to Mohamed A. El-Erian in Bloomberg.

“The responsiveness of gold, as well as the overall price, appears weaker than would have been expected from historically based models”, says El-Erian, comparing gold to other havens such as ten-year treasury bonds, which saw its yield trade down to below 2.10%, compared to gold’s “muted response”. Conventional wisdom suggests treasury yields go down in times in low confidence as a safe haven asset.

Photo: US ambassador to the UN Nikki Haley. Credit: Gage Skidmore. Licensed under CC BY-SA 2.0

Link to this article: : http://www.goldmadesimplenews.com/gold/gold-price-steady-as-north-korea-crisis-continues-13371/

Posted by on Aug 30 2017. Filed under Gold News. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.

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