Gold jumped to its highest since November on Tuesday, extending the prior day's rally above $1,300 per ounce as investors bought bullion as insurance against falling prices of other assets after North Korea tested a ballistic missile over Japan. US President Donald Trump warned that all options are on the table for the United States to respond to North Korea's new show of force.
"Funds and traders are filling their boots with gold at the moment and so far that's justified," said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen. "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." Geopolitical risks can boost demand for safe-haven assets such as gold, which is considered a store of value during volatility in other markets.
Spot gold was up 0.4 percent at $1,314.52 an ounce by 1:54 p.m. EDT (1754 GMT), after touching $1,325.9399, its highest since Nov. 9. US gold futures for December delivery settled up 0.3 percent at $1,318.90. "Investors are seeking safe shore and are unlikely to bail too quickly on the yellow metal now, though profit taking will certainly test the downside," said Miguel Perez-Santalla, vice president of Heraeus Metal Management in New York.
Spot gold climbed by 1.4 percent on Monday, breaking through key resistance at $1,300 an ounce after comments by the head of the European Central Bank boosted the euro and pressured the dollar. Gold extended its rally on Tuesday as global equity prices slipped, with the MSCI world index at a one-week low as investors flocked to safe-haven assets. Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 1.1 percent to 814.36 tonnes on Monday.
Other precious metals benefited, with palladium up 1.1 percent at $944, after rising to a 16-1/2-year high at $949.10. Platinum gained 1.3 percent to $1,000 after marking its highest since March 2 at $1,006.30. The platinum premium over palladium was around $57, up slightly from levels in July but down sharply from around $254 in February as the palladium market outperformed.
"We still think that the two could trade at parity in the coming months, particularly if platinum prices lose steam, but this would likely be temporary rather than palladium trading at a sustained premium," Standard Chartered said in a note. Spot silver was up 0.2 percent at $17.45 after touching $17.66, a 2-1/2-month high.
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