Gold rose to the highest in nearly two months on Wednesday, after North Korea said it is considering an attack on the US Pacific territory of Guam and US President Donald Trump boasted of the strength of the American nuclear arsenal. Bullion was on track for its biggest one-day rise in nearly three months.
The tensions rattled global markets, sending investors out of equities and into the safety of the Swiss franc, government debt and gold. The VIX "fear gauge" of expected volatility on the S&P 500 hit its highest in more than a month. "The market hates uncertainty and that's certainly what we have now," said Ole Hansen, head of commodity strategy at Saxo Bank.
"But looking ahead, unless we start to see a conflict break out or a major stock market correction, (gold) is capped at 1,295, (although) the upside at the moment is the favored direction." Spot gold was up 1.25 percent at $1,275.98 an ounce by 2:30 pm EDT (1830 GMT), after reaching its highest since mid-June at 1276.10. US gold futures for December delivery settled up 1.3 percent at $1,279.30.
The rally came after Tuesday's drop to a two-week low on better-than-expected US jobs data, while investors awaited US inflation figures later this week for further clues about the pace of interest rate rises. "We've had some competing forces play out over the past 12 hours - the US dollar was stronger off economic data, but that was quickly reversed with President Trump's comments about North Korea," ANZ analyst Daniel Hynes said.
The dollar turned lower versus a basket of currencies Wednesday and was at a near two-week low against the Swiss franc, a traditional safe haven. "We believe continued saber-rattling ... could take gold prices higher still," said Nitesh Shah, director at ETF Securities.
Platinum gained 0.6 percent at $972.90 per ounce, having hit its highest since April 21 at $980.60. Platinum extended its four-week rally even after South African President Jacob Zuma survived a no-confidence vote in parliament, causing the rand to fall against the US dollar.
"The weaker currency lowers the production costs for platinum mining producers," said Commerzbank in a note. Silver rose 2.8 percent to $16.87, on track for its biggest one-day rally since September 2016 after rising to $16.91, the highest since June 15. Spot palladium fell 1 percent to $888.30.
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