Gold prices spiked more than one per cent on Monday to its highest level in a year as risk averse investors sought refuge in the safe haven metal amid geopolitical tensions triggered by North Korea, which tested a hydrogen bomb on Saturday.
International spot gold prices hit a high of $1,334.33 (Dh4,900) an ounce, the highest level since September of last year, before trading 0.68 per cent higher at $1,334.19.
“Safe haven assets are back in demand, following yesterday’s announcement that North Korea had tested their most powerful nuclear bomb yet,” said Hussain Syed, Chief Market Strategist at FXTM. Comex Gold for December delivery was up 0.64 per cent higher at $1,338.90 an ounce. The Swiss Franc and the yen, which are also seen as safe haven assets, gained.
Gold has been a beneficiary of geopolitical tensions between the United States and North Korea, even as the dollar has become weaker. The yellow metal has gained 16 per cent since the start of the year.
Equity markets in Europe and Asia fell with Japanese and South Korean markets severely hit as traders cut their risky exposure, but analysts said the market reaction showed a trend.
The Nikkei 225 index closed 0.93 per cent lower at 19.508. The Topix index closed 0.99 per cent weaker at 1,603.55. South Korea’s Kospi closed 1.19 per cent lower at 2,329.65.
“The markets’ reaction seems similar to when missile launches have taken place in the past; investors sell stock, rush to safe havens, assess the situation, and then buy the dips as tension eases. While stocks fell in Asia, the sell-off was not massive, mainly because the nuclear test occurred over the weekend and there was enough time to digest the news,” Sayed said.
European markets also fell between 0.17 and 1 per cent. The Euro STOXX 50 was down 0.24 per cent at 3,435.56. German DAX index was 0.17 per cent lower at 12,122.55.
Meanwhile, traders will eye the reaction from US markets on Tuesday, which are shut for the Labour Day holiday.