(MENAFNEditorial) Gold prices edged lower on Monday, pulling back from their highest level in around two months as concerns about tensions between the U.S. and North Korea eased. Comex gold futures dipped $1.80, or around 0.1%, to $1,292.18 a troy ounce by 2:45AM ET (0645GMT). It rose to its highest since June 6 at $1,298.10 in the prior session. The yellow metal notched a third-straight day of gains on Friday, capping its strongest weekly rise in four months as simmering North Korean tensions buoyed haven demand for precious metals. Geopolitical concerns appeared to fade on Monday as U.S. Secretary of Defense Jim Mattis and Secretary of State Rex Tillerson said that the Trump administration would continue to seek diplomatic resolutions with Pyongyang. Meanwhile, Central Intelligence Agency Director Mike Pompeo and national security adviser H.R. McMaster, in separate Sunday talk show appearances, said there was no indication war with North Korea will break out. The soothing comments came after Present Donald Trump said late last week that military options against the hermit state were locked and loaded. Market players looked ahead to a busy week of economic data, including the monthly retail sales report on Tuesday, for further clues on the timing of the next Federal Reserve rate hike. Traders will also focus on minutes of the Feds latest policy meeting due Wednesday, as they look for more hints on how the central bank plans to pare back its balance sheet. Markets remain skeptical the Fed will raise interest rates again this year, according to Investing.coms Fed Rate Monitor Tool, due to worries over the subdued inflation outlook, but it is widely expected to start the process of reducing its balance sheet by September.
Gold's rally in recent weeks may be its first boosted by Twitter, but for the gains to sustain it will likely take more than just the ramping up of global geopolitical tensions amid bellicose tweets from U.S. President Donald Trump. Spot gold XAU= has jumped 7 percent from its recent intra-day low on July 10 to close at $1,288.81 an ounce on Aug. 11, it's highest in two months. The precious metal is up 12 percent since the end of last year, and while there have been other factors behind the gains, the froth in the rally is almost certainly down to its appeal as a safe haven in times of heightened political risk. Trump's use of the social media site Twitter to threaten "fire and fury" against North Korea certainly raised the tensions around the isolated dictatorship's pursuit of nuclear weapons capable of reaching the continental United States. The U.S. President later doubled down on his tweet, saying perhaps it didn't go far enough, raising fears that Trump would go as far to consider a pre-emptive strike on North Korea, a move that could escalate into retaliatory attacks on neighbours and U.S. allies South Korea and Japan. The geopolitical tensions stoked by Trump are grist to the mill for gold, but it's also likely the case that a sustainable rally for the yellow metal can't be built on the threat of conflict alone.
Gold prices gained slightly in Asia on Monday in a buy regional data day, but North Korea off the boil for now. Gold futures for December delivery rose 0.05% to $1,293.36 a troy ounce on the Comex division of the New York Mercantile Exchange. In China, fixed-asset investment rose 8.3%, compared with a 8.6% gain seen in July on year along with industrial production which gained 6.4%, missing a 7.2% gain seen and retail sales increased 10.4%, compared to a 10.8% gain seen. Japan's second quarter surged an unexpected 4..0% on year as investment in plant and equipment lifted sentiment for the sixth straight quarter of expansion, official data released on Monday showed for the fastest pace of growth since January-March 2015. The figure beat a 2.5% gain expected on year and saw the quarter pace at 1.0, well above the 0.6% seen. Japan, second quarter GDP was expected to rise a provisional 2.5% on year and at a 0.6% pace on quarter. Ahead this week, the Feds latest meeting will be in focus as investors look for more hints on the timing of the next U.S. rate hike. A report on U.S. retail sales will also be closely watched. Elsewhere, UK data on inflation and employment will be in the spotlight amid ongoing concerns over the economic fallout from Brexit. Last week, gold prices rose to a two-month high on Friday following a weaker-than-expected U.S. inflation report that investors worried would delay plans for another interest rate hike by the Federal Reserve this year. A Labor Department report showed that U.S. consumer prices edged up 0.1% in July from the prior month, bringing the annual increase in the consumer price index to 1.2%. The data was the latest in a string of weak inflation readings that investors worry will make the Fed more cautious about plans for a third rate hike this year. Futures traders are pricing in about a 35% chance of another rate hike by December, according to Investing.coms Fed Rate Monitor Tool.
Gold found support in Asia on Friday as tensions between North Korea and Washington show no signs of abating and investors looked ahead to data out of top gold buyer India on FX reserves for July and industrial production for June. Gold futures for December delivery on the Comex division of the New York Mercantile Exchange rose 0.29% to $1,293.79 a troy ounce. Overnight, gold prices jumped to two-month highs Thursday, as geopolitical tensions between the U.S. and North Korea remained while a duo of disappointing U.S. economic reports weighed on the dollar, lifting demand for the precious metal. Risk aversion continued for the second day in a row, lifting demand for the safe-haven gold, a day after North Korea said it was "carefully examining" a plan to strike Guam, where a U.S. military base is located. The release of inflation and initial jobless claims data failed to offset the flight to safety as both reports undershot expectations, stoking uncertainty over the Feds ability to raise rates later this year.The producer-price index fell 0.1% in July, the Labor Department said Thursday, the first drop since last August. The core rate, which excludes volatile categories of food, energy and trade, was flat in the month. Meanwhile, initial claims for state unemployment benefits increased 3,000 to a seasonally adjusted 244,000 for the week ended August 5, the Labor Department said on Thursday. Economists had forecast claims falling to 240,000. New York Fed President William Dudley, however, suggested Thursday, the central bank was on track to raise interest rates once more and begin shedding some bond holdings this year. "Our outlook anticipates a continued moderate growth trend, with some further strengthening in the labor market and an increase in inflation over the medium term toward our objective of 2 percent," Dudley said in prepared remarks that did not specifically mention monetary policy.
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