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Gold buoyed as hedge fund titan sees leaders ‘playing chicken’

Bullion for immediate delivery rose as much as 0.2 per cent to $1,289.07 an ounce, the highest level since June 7

Gulf News

Singapore: Gold advanced to the highest in two months as the spike in tensions between the US and North Korea fanned demand, with hedge fund billionaire Ray Dalio flagging rising risks, including “two confrontational, nationalistic, and militaristic leaders playing chicken with each other.”

Bullion for immediate delivery rose as much as 0.2 per cent to $1,289.07 an ounce, the highest level since June 7, and traded at $1,287.71 (Dh4,725.90) by 10:41am in London, according to Bloomberg generic pricing. The metal is up 2.3 per cent this week, and 12 per cent in 2017. Miners’ shares rose.

Gold is among the top performing commodities this year as investors weigh geopolitical risks, as well as a weaker dollar. President Donald Trump intensified warnings to North Korea this week, promising a massive response to any strike against the US or its allies, boosting haven demand. Dalio, who manages Bridgewater Associates, said emerging risks were more political than economic, which made them challenging to price, according to a LinkedIn post.

“Gold remains in demand as a safe haven and is still on the up,” analysts at Commerzbank AG including Eugen Weinberg wrote in a note.

Investors will be closely watching Friday’s consumer price data in the US to get further clues on the outlook for the Federal Reserve’s monetary policy. On Thursday, New York Fed President William Dudley cautioned that it will “take some time” for inflation to reach the central bank’s 2 per cent target, the latest official warning that price pressures remain muted.

Hellacious war

In his post — which was decorated with a photo of a gathering storm — Dalio recommends investors consider placing 5 per cent to 10 per cent of their assets in gold as a hedge against political and economic risks. In addition to the North Korean situation, Dalio also wrote that he sees rising odds of Congress failing to increase the US debt ceiling, leading to a technical default.

As Trump and Kim Jong Un trade barbs, Dalio wrote that “the world is watching to see which one will be caught bluffing, or if there will be a hellacious war.” He added: “When it comes to assessing political matters [especially global geopolitics like the North Korea matter], we are very humble. We know that we don’t have a unique insight that we’d choose to bet on.”

Gold miners are benefiting from the jump in prices. The FTSE/JSE Africa Gold Mining Index rose 2.6 per cent, its third day of gains. AngloGold Ashanti Ltd. and Harmony Gold Mining Co Ltd rose more than 3 per cent.