North Korean missile launch sparks gold rush
TRADERS rushed for safety yesterday as the threat of war with North Korea sent shares tumbling across Europe.
The Communist nation stunned investors by firing a guided missile over Japan in what has been described as its most aggressive action for two decades.
It raised the spectre of a major conflict between nuclear powers for the first time since the Cold War if the US feels compelled to hit back, with potentially devastating consequences for the world economy.
Gold – traditionally a safe haven in times of strife – climbed to an 11month high of $1,322.20 per ounce before giving up its gains on a day of turmoil for financial markets.
CMC Markets analyst David Madden said: ‘The situation surrounding North Korea has become more serious now, and we are seeing a risk-off strategy being adopted by traders.’
Tim Ghriskey of Solaris Group said: ‘This has real psychological ramifications for the markets – this might not end in a pretty fashion.’
In Britain, miners of the metal enjoyed a rally on hopes of increased demand. It propelled Randgold Resources to the top of the blue chip FTSE 100, up 4.6pc, or 345p, to 7915p.
Rival Fresnillo gained 2.6pc, or 41p, to trade at 1621p per share.
Hussein Sayed of currency trader FXTM, said: ‘Gold seems to have benefited from the tensions.’
Currencies in traditionally neutral nations also prospered, another sign that markets fear the worst.
The Swiss franc climbed as much as 0.8pc against the dollar and there was a 0.3pc rise in the Japanese yen, which is still, ironically, popular in chaotic times – even though Japan is in the heart of the danger zone. Meanwhile, shares dropped across Europe.
The UK’s blue chip FTSE 100 index shed more than £16bn to close down 0.9pc, or 64 points, at 7337.43. The Dax in Germany fell 1.5pc to its lowest level since March. There were similar selloffs in Holland, France and Spain as traders pulled their money out of risky markets. The Stoxx 600 index of the continent’s biggest listed firms dropped 1pc.
President Donald Trump’s response to the crisis did little to reassure investors, as he issued a statement warning that ‘ all options’ were being considered.
Konstantinos Anthis of ADS Securities said: ‘If the US president opts for a tempered response then stock traders will breathe a sigh of relief but on the opposite case a sharp sell-off can drive the equity indices down to their recent lows.’
US equities fell in morning trading yesterday, before recovering some lost ground.
It followed sharp falls in Asia after the missile test, which happened yesterday at 6am Korean time. The nuclear-capable rocket flew more than 1,650 miles, crossing Japan’s Hokkaido island before landing in the sea.