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Gold Bullion Market Update – August 2017

Friday, September 1, 2017

The gold price spiked to a near 10-month high on the morning of Tuesday 29th after North Korea launched a ballistic missile that flew over Japan.

The missile landed at around 6am on Tuesday in the waters off the east coast of Hokkaido, Japan’s second largest island, after the Japanese government issued an alert on the island urging residents to find shelter.

The price of gold jumped to £1,018.92 per troy ounce following the launch, as the tensions caused investors to seek a safe-haven for their assets.

Demand for the precious metal, which has a long history of stability even in times of economic uncertainty, is often high following geopolitical risks and uncertainty when traders seek safety from other more volatile markets.

Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen thinks investors are justified to be putting their faith in gold.

He told Reuters: “Stocks are coming off hard, the dollar has weakened and now also the yen, which has been the missing link, while bond yields are also taking a beating.”

The gold price high on the 29th wasn’t the first of the month, with rates rising to £1,005.93 on Friday 18th too as the dollar weakened in the wake of political uncertainty in the US and an Islamist attack in Spain.

Sixteen people were killed in a series of attacks in and around the Spanish city of Barcelona on Thursday, August 17th and in the early hours of the following morning.

Markets were also unnerved by US President Donald Trump’s remarks on violence in Virginia, which prompted the disbandment of two prominent business advisory councils.

Speaking to Reuters, INTL FCStone analyst Edward Meir said he suspects the discord coming out of Washington could pressure the dollar further and prove supportive for the gold price.

Danske Bank analyst Jens Pedersen agreed, telling the publication: “There is clearly more for financial markets to be concerned about.”

Referring to the attack in Spain and the US political uncertainty, Pedersen added: “That has led to a risk-off environment, and that’s supportive for gold.”