Gold extends rally to '17 high as North Korea test adds to angst

[NEW YORK] Gold rose to the highest this year after North Korea fired a ballistic missile over Japan, boosting haven demand and extending a rally fuelled by declines in the US dollar. An index of precious-metals mining stocks touched a four-month high.

An index of the greenback touched the lowest since Jan 2015 before paring losses later on Tuesday. Stocks fluctuated as North Korea's ballistic missile test rattled markets. Palladium extended gains and platinum rose above US$1,000 an ounce for the first time since March.

"Gold prices have rallied to their highest level since US elections" in November, analysts at Goldman Sachs Group Inc. including Abhinandan Agarwal said in a note to clients.

"Expect precious-metal stocks to outperform today."

Bullion for immediate delivery rose 0.3 per cent to US$1,314.23 an ounce at 1:57pm in New York, according to Bloomberg generic pricing. The metal gained as much as 1.2 per cent to US$1,326.08 an ounce, the highest since Nov 9. Gold futures for December delivery climbed 0.3 per cent to settle at US$1,318.90 at 1:42pm on the Comex in New York.

A Bloomberg Intelligence index of gold-mining companies climbed 3.5 per cent, touching the highest since April, with AngloGold Ashanti Ltd and Harmony Gold Mining Co. leading gains.

Gold has surged almost 15 per cent this year, rising every month except June, as investors weigh the possibility of conflict in Asia, with Kim Jong Un's regime pushing on with missile tests and US President Donald Trump vowing a stern response.

Prices have also climbed as the Federal Reserve is expected to go slow on further interest-rate increases. Low rates are a boon to non-interest-bearing precious metals.

Odds of a rate hike by year's end are at about 30 per cent, down from more than 50 per cent at the beginning of last month, based on fed funds futures.

Demand for haven assets also rose as Wall Street and Washington braced for the repercussions of Tropical Storm Harvey in Houston, expected to be the costliest US natural disaster since Hurricane Sandy in 2012.

Harvey "is likely to reduce US GDP in the third quarter," Jim Wyckoff, senior analyst at Kitco Metals Inc in Montreal, said in a report.

BLOOMBERG