Dubai: Gold may be a winner again this week as investors continue to seek refuge from increasingly tense politics.

Tensions between the United States and North Korea, triggered by a war of words both in the UN and on Twitter, has been impacting commodities and currencies, which could help gold reclaim the $1,300 (Dh4,771) an ounce mark

Last week saw American bombers with fighter jet escorts flying to the farthest point north of the border between North and South Korea, and North Korea threatening to detonate a hydrogen bomb over the pacific.

“If there is any kind of reaction from North Korea, the gold price could easily jump above the $1,300 mark,” said Naeem Aslam, chief market analyst with Think Markets in London.

Gold prices recently reached a yearly high of near $1,350, only to see it fall to below $1,297.30 an ounce on Friday. Gold has gained 13.5 per cent in the year so far.

Analysts also expect the yen, a safe haven currency, to gain from any action or reaction on the geopolitical front. On Friday, the yen strengthened 0.44 per cent versus the greenback to 112.00 per dollar. The yen was boosted by signals that the Fed may still hike interest rates by the end of the year.

However, over the short-term expect more weakness in the dollar, which should help the yellow metal. Gold and the dollar move in opposite directions as the two compete for funds globally.

“The Fed’s more hawkish than expected stance on monetary policy may bolster the dollar in the very near-term, we believe that converging global monetary policies, as well as a stronger global growth outlook, will put further pressure on the dollar over the next few years,” said Charles Melchreit, Deputy Head of Fixed Income, US at Amundi Asset Management.

Mild reaction

On Friday, US equities reacted mildly to the utterances from US president Donald Trump. The Dow Jones Industrial Average (DJIA) dipped to a low of 22,299.58, and closed flat at 22,349.59. The DJIA has gained 2 per cent in the past one month, indicating muted response to the increasing geopolitical tensions.

“A slow period in corporate news and resilience of investors faced with geopolitical worries has maintained investor confidence in equities markets over the past few weeks,” Vaqar Zuberi, Head of Hedge Funds at Mirabaud Asset Management told Gulf News.

Going ahead, third quarter results from companies will be key.

“The recent increase in tension between the US and North Korea have not had a meaningful impact on investor outlook in equities. Discussions with Asian investors, geographically most vulnerable to any risks, reveal a sanguine calculation that events will not escalate to meaningful levels, and therefore their focus remains on economic data and corporate earnings,” Zuberi said.

Oil

Oil prices may remain under pressure after prices hit their highest level in six months.

Opec and non-Opec members did not come to an agreement at a meeting in Vienna last week, saying that the global supply glut had been reduced to a considerable extent. Opec and non-Opec producers will meet in mid-November to decide the next course of action.

“Brent crude prices are expected to trade within the well established range of $52-$58 (per barrel) and are likely to retreat to the lower part of the range,” Zuberi said. Brent closed at $56.86 per barrel on Friday.

Oil prices have gained more than 15 per cent in three months, suggesting Opec-led output cuts of 1.8 million barrels per day combined with the shutdown of oil rigs in Texas following Hurricane Harvey have reduced the global crude glut.