Gold down as N. Korea tensions subside, Irma impact less than expected
(FinancialPress)—Tension over the North Korean nuclear race, and Hurricane Irma‘s forecasted impact had people turning to gold as a safe haven for the potential drop in stocks. However, the wave has eased and the precious metal dropped to its lowest in over a week this Tuesday morning.
Markets across the world reached record heights as concerns waned, and investors returned to higher risk assets over the safer gold, bonds and Japanese yen.
After a big 1.4% drop on Monday (the biggest 1-day drop in 2 months), spot gold opened Tuesday with a 0.2% drop %1,324.17 – its lowest value since Sept. 1st.
Natixis analyst Bernard Dahdah expanded on the issue: “The North Korea story has had (an impact) on the price of gold, but these geopolitical events tend to be quite limited in time… The market accommodates surprisingly quickly when things calm down.”
“It was the weakness of the dollar that was really driving gold, and the tensions with North Korea,” he said. “The rate at which the dollar can still depreciate is slowing down.”
The US Dollar went up 0.1%, furthering Mondays rise after last week‘s 2 and a half year low. European stocks also rose on Tuesday, helping record stocks reach another record high.
ANZ released a note stating “North Korean inaction over the weekend took some heat out of the crisis, with investors becoming a little bit more comfortable,” note. “Hurricane Irma also caused less damage than original feared.”
“The market is likely to turn its attention to the Fed, with speakers now in blackout mode ahead of its policy meeting next week.”
The Federal Reserve has raised U.S. interest rates twice this year in response to upbeat growth data and falling unemployment, but persistently soft inflation data has tempered expectations for another hike in December.
Positive growth data and falling unemployment have led the Federal Reserve to raise U.S. interest rates twice in the current year. However, soft inflation data has show to be persistent – thus cooling expectations for a new hike in December.