Gold, silver shine as geopolitical tension rises

Paterniano Del Favero
Agosto 10, 2017

That prompted North Korea to say it was considering firing missiles at Guam, a U.S. Pacific island territory.

The dollar fell 0.39 percent against the yen.

Growing tension between the U.S. and North Korea boosted the Swiss franc, the Japanese yen, gold and government bonds as investors sought out traditional safe havens at a time of geopolitical uncertainty.

Risk off sentiment was broadly pervasive through the currency markets especially with European stocks set to follow Asia's lead lower with major index futures indicating a 0.5 to 0.8 percent decline.

The Swissie, as traders sometimes call the currency, tends to gain during times of economic or geopolitical stress.

The euro was down 0.3 percent at just over $1.17 and nearing a two-week low, while the New Zealand dollar tumbled a full 1 percent as its central bank head bluntly said he wanted it lower.

Trump's remarks on Tuesday that North Korea would face "fire and fury like the world has never seen" weighed on Wall Street and drove up the VIX "fear gauge", or the cost of protection against a drop in the S&P 500.

Guam which is more than 3,000 km (2,000 miles) to the southeast of North Korea, is home to about 163,000 people and a U.S. Navy base that includes a submarine squadron and a Coast Guard group, and an air base.

With the rhetoric rumbling on, Europe's top-rated German bond yield held near six-week lows.

USA stocks closed lower on Wednesday as heightened geopolitical tensions chased investors away from equities that are deemed riskier.

Yields on core government debt fell.

Thin liquidity could also amplify market moves, she added, with markets in Singapore closed for a public holiday and many market participants in Japan taking time off this week ahead of a public holiday on Friday. Oil also regained momentum as data pointed to declining USA inventories.

In commodities trading, U.S. crude oil was wallowing around $49 to the barrel amid speculation that a predicted gain in American output will offset OPEC-led efforts to trim a global glut.

Mike van Dulken, head of research at Accendo Markets, said: "Equities are nursing losses thanks to an unwelcome escalation in geopolitical tensions between the United States and North Korea, both trading nuclear threats that have awoken volatility from its slumber and seen risk assets shunned in favour of the traditional safe havens". "Therefore one shouldn't make a big call".

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