Gold Up On War Rhetoric

At the time of writing, gold is sitting at a $1,276.90 and the news community is unanimously attributing its now 8 week high to similarly heightened tensions between the United States and North Korea. 

In daily terms, gold gained $16.70; a performance not bettered since May 17th when it gained $22.30. Silver, now at a two month high, saw its sharpest daily rise since September 21st of last year. Platinum also hit a 3 month high. 

The mining community is also catching a bid with Bloomberg Intelligence’s gold miner index (which tracks 15 companies) rising over 1%. Randgold Resources and Barrick were particularly strong, both rising over 1.4%.

Yesterday saw an increasing exchange of words between the United States and North Korea with Donald Trump threatening “fire and fury like the world has never seen” and Kim Jong Un threatening missile strikes on the US territory of Guam. Although most news outlets are citing just this brief exchange, these comments stand on the back of a heated couple of days.

Over the weekend, new sanctions on North Korea were announced by the UN; a move antagonised further by Monday’s release of strategic exercise photographs around Guam by the United States. North Korea’s rhetoric included talk of using the “medium to long range strategic ballistic rocket Hwasong-12 in order to contain the U.S. major military bases on Guam including the Anderson Air Force Base”, the current location of a U.S. strategic bomber deployment.

These market responses are a good reminder of one of gold’s fundamental purposes. Lost in the daily technical analysis and discussions of mine supply is the immutable fact that gold is and has long been viewed as a safe haven asset. In the week of the Cuban Missile Crisis of October 1962 for example, gold demand was higher than during the 1960 gold rush and was supplied to the market by the then recently established London gold pool in order to retain the $35 price peg in place at the time.

Ross Norman, the CEO of London’s Sharps Pixley and a gentleman we’ve written of previously, commented on the recent safe haven buying saying that “it’s really gold behaving in its traditional manner as a safe-haven asset”. 

Some commenters however see more positive drivers at play for gold prices currently. “Precious Metals Investing for Dummies” author Paul Mladjenovic overnight said “I think it’s going to be a stronger time for gold than in prior times” referring not just to the heightened geopolitical tensions but also to gold’s seasonality. “August, September, October tend to be good months for the metals and I think this time will be no different”. 

Furthermore Paul notes that “we’re in the precursor production phase for things such as jewellery and other products such as electronics for the holiday season in the United States and Christmas world-wide so I think there’s a lot of great potential here definitely.” 

Overnight, GoldCore authored a succinct summary of the escalation in tensions with North Korea which we will conclude with today.

 “This should serve as a timely reminder that it is the bigger picture which is important when it comes to economics and finance. Whilst economic data such as employment figures are important, it is what the global picture and geopolitics look like over the long-term which will drive safe haven assets such as gold and silver.”