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Gold Tops $1,300 Again as US-North Korean Tensions Heighten

September 25, 2017 at 16:38 by Andrew Moran

Gold futures have topped $1,300 once again as US-North Korean tensions continue to worsen. Both sides have engaged in fierce rhetoric over the last week, which has been a boon for the yellow metal. Geopolitical risks are helping gold offset a rising US dollar, a bullish US central bank, and all-time high equities.

December gold futures surged $10.30, or 0.79%, to $1,307.80 per ounce at 16:19 GMT on Monday. This comes as the precious metal posted back-to-back weekly declines, but gold prices have advanced close to 20% year-to-date. Gold is now faring better in 2017 than the S&P500 so far this year.

Silver, the sister commodity to gold, is rallying to initiate the trading week. December silver futures rose $0.10, or 0.59%, to $17.08 an ounce. The white metal has also been battered over the last week as silver recorded a 3.9% weekly drop.

Investors are pouring into the safe-haven assets after North Korean Foreign Minister Ri Yong Ho told reporters in New York on Monday that President Donald Trump’s recent remarks are an act of war and provide Pyongyang the right to strike back. The North Korean official hinted that the military could shoot down US bombers, even if they do not invade North Korean airspace.

Gold’s climb may have been capped by other factors on Monday.

The US dollar jumped 0.58%, which is bad for commodities like gold and silver because it makes it more expensive for foreign investors to purchase.

The Federal Reserve recently announced that it would begin to unwind its $4 trillion balance sheet in October. It plans to sell about $50 billion per month and then boost it to $100 billion sometime late next year. The US central bank also plans to raise interest rates one more time this year. Gold is generally sensitive to a rising-rate environment because it lifts the opportunity cost and sends traders into yield-bearing assets.

Some investors are also paying attention to the 2017 German election results on Sunday. The historic electoral contest saw the AfD, a far-right and anti-European Union (EU) political party, win 13% of the vote with 94 seats in the Bundestag.

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