Global stocks down and gold rises after North Korean missile test
Stocks yesterday slumped around the world and havens including gold jumped after North Korea fired a ballistic missile over Japan, rattling markets from New York to London to Sydney.
Petrol climbed as energy firms braced for another hit from Tropical Storm Harvey.
As equities retreated, volatility rose and bonds gained in classic risk-off moves. Treasuries jumped and the dollar weakened. Gold surged to the highest since November yesterday as investors bought bullion as insurance against falling prices of other assets after the missile test.
“Funds and traders are filling their boots with gold at the moment and so far that’s justified,” said Ole Hansen, the head of commodity strategy at Saxo Bank in Copenhagen.
“No matter where you look you can’t point your finger at anything that’s gold negative. Stocks are coming off hard, the dollar has weakened and now also against the yen, which has been the missing link, while bond yields are also taking a beating.”
Spot gold, which rose for a third straight session, was up 0.9 per cent at US$1,320.64 an ounce by 13.55 GMT after touching $1,325.94, its highest since November 9. US gold futures for December delivery rose 0.9 per cent to $1,326.50. Spot gold had climbed by 1.4 per cent on Monday, breaking through key resistance and marking its biggest one-day percentage rise since mid-May after comments by Mario Draghi, the head of the European Central Bank, boosted the euro and hit the dollar. Gains were then extended after the North Koreans fired a ballistic missile over Japan’s northern Hokkaido island into the sea early yesterday, escalating tensions on the Korean peninsula.
The Swiss franc and the yen were the best-performing major currencies. The euro climbed above $1.20 for the first time since 2015, adding yet another headwind for the region’s stocks. Petrol headed for a sixth day of advances as Harvey picked up strength again after inundating refineries along the Texas coast.
Japan called North Korean leader Kim Jong-un’s latest provocation an “unprecedented, grave and serious threat”, and asked the United Nations Security Council to hold an emergency meeting, while the US president Donald Trump said the United States will consider “all options” in its response. The missile seems likely to reignite the simmering tension between North Korea and the US just days after secretary of state Rex Tillerson praised the nation for its “restraint”.
“Some observers had thought the US and North Korea were pursuing discussions behind closed doors, but it turns out North Korea continues to pursue missile development,” said Chihiro Ohta, a Tokyo-based senior strategist at SMBC Nikko Securities. “The risk-off stance is likely to continue even if the US responds calmly.”