Gold extends rally to 2017 high as North Korea test adds to angst

NEW YORK – Gold rose to the highest this year after North Korea fired a ballistic missile over Japan, boosting haven demand and extending a rally fuelled by declines in the dollar. An index of precious-metals mining stocks touched a four-month high.

The greenback fell for a third day to its lowest since January 2015 and stocks slumped around the world as North Korea’s ballistic missile test rattled markets. Palladium extended gains and platinum rose above $1 000/oz for the first time since March.

“Gold prices have rallied to their highest level since US elections” in November, analysts at Goldman Sachs Group, including Abhinandan Agarwal said in a note to clients. “Expect precious-metal stocks to outperform today.”

Bullion for immediate delivery rose 0.8% to $1 320.95 at 9:57 am in New York, according to Bloomberg generic pricing. The metal gained as much as 1.2% to $1 326.08/oz, the highest since November 9, the day after Trump was elected.

A Bloomberg Intelligence index of gold-mining companies climbed 3.6%, touching the highest since April, with Harmony Gold Mining and AngloGold Ashanti leading gains.

Gold has surged 15% this year, rising every month except June, as investors weigh the possibility of conflict in Asia, with Kim Jong Un’s regime pushing on with missile tests and US President Donald Trump vowing a stern response. Prices have also climbed as the Federal Reserve is expected to go slow on further interest-rate increases. Low rates are a boon to non-interest-bearing precious metals.

Odds of a rate hike by year’s end are at about 28%, down from more than 50% at the beginning of last month, based on fed funds futures.

Demand for haven assets also rose as Wall Street and Washington braced for the repercussions of Tropical Storm Harvey in Houston, expected to be the costliest US natural disaster since Hurricane Sandy in 2012.

“The US dollar index is being further hobbled by the hurricane damage in Texas, which is likely to reduce US GDP in the third quarter,”  Jim Wyckoff, senior analyst at Kitco Metals, in Montreal, said in a report.