Gold prices climbed 1 percent to their highest in almost a year on Monday after North Korea's latest and most powerful nuclear test drove investors towards safe-haven assets. Spot gold had risen just over 1 percent to $1,338.36 per ounce by 0708 GMT, after earlier touching its strongest level since late September at $1,339.47. US gold futures for December delivery were up 1 percent at $1,344 an ounce.
"Gold has rallied following further escalation in geopolitical tensions around North Korea," said Jameel Ahmad, vice president of Market Research at FXTM. "This looks like safe-haven buying from traders. These tensions do not look like they are going anywhere, and are likely to encourage investors to hold on to their gold positions," Ahmad said. North Korea on Sunday conducted its sixth nuclear test, of what it said was an advanced hydrogen bomb, prompting the threat of a "massive" military response from the United States if it or its allies were threatened.
The Japanese yen and sovereign bonds also climbed on Monday as North Korea's nuclear test provoked a knee-jerk shift to safe havens, though equity losses were modest. Investors were also looking ahead to a European Central Bank (ECB) meeting on Thursday. Markets are expecting no policy change from the ECB this month but the bank is likely to announce a reduction of its monthly asset purchases in October, according to a majority of economists in a Reuters poll.
Spot gold may gain more to $1,345 per ounce, as it has pierced a resistance at $1,333, Reuters technical analyst Wang Tao said.
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