London: Gold held near one-year highs on Wednesday, boosted by tensions on the Korean peninsula and a lower dollar due to growing expectations the Federal Reserve will delay rate rises.
Spot gold was unchanged at $1,338.30 an ounce at 1054 GMT, a gain of around 8 per cent so far this quarter and more than 16 per cent so far this year. It touched $1,344.21 an ounce on Tuesday, its highest since September 8.
US gold futures were down 0.1 per cent at $1,343.40 an ounce.
“Rising geopolitical tensions, the hurricane hitting the US and the looming debt ceiling are increasing demand for safe assets,” said Danske Bank analyst Jens Pederson.
“These extraordinary factors are also weakening the dollar from the point of view that the Fed may further postpone normalisation of monetary policy, which would be good news as it would keep a lid on US yields.”
Both US government bonds and gold are seen as risk-free by investors. Low US Treasury bond yields mean there is little opportunity cost in holding gold, which earns nothing and costs money to insure and store.
Analysts say low US yields mean investors are unlikely to buy Treasuries, which would also weigh on the dollar.
A lower US currency makes dollar-denominated gold cheaper for holders of other currencies, which could boost demand.
A potential standoff over the US federal debt ceiling has raised alarm bells among investors who fear a repeat of 2011 when a prolonged showdown over increasing the borrowing limit and subsequent downgrade of US credit quality led to slump in the S&P 500 stock index.
Investor unease was reinforced after a North Korean diplomat warned his country is ready to send “more gift packages” to the US as world powers struggled for a response to Pyongyang’s latest nuclear weapons test.
“The concern now is that another launch could take place on September 9th, which is the (North Korea’s) Independence Day,” said INTL FCStone analyst Edward Meir.
“Gold is likely to move higher over the course of September, sustained by a weaker dollar and North Korean tensions ... Any further wobbles in US equities could provide further support and perhaps nudge it towards our $1390 price target.”
Technical resistance is at $1,352, near the high from last September, followed by $1,376, the upper Bollinger band on the monthly charts. But the momentum indicator near zero suggests gold may be in for a period of consolidation.
Elsewhere silver gained 0.3 per cent to $17.95, platinum rose 0.3 per cent to $1,009.00 and palladium
added 0.4 per cent to $962.05 an ounce.