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Gold prices are expected to tick higher this week, analysts said, spurred by the latest North Korean missile test on Sunday, which is likely to send investors seeking safe havens.
This risk-averse sentiment is expected to carry over to international equity markets, though analysts do not expect more than a marginal decline for the week.
North Korea early on Sunday conducted its sixth and most powerful nuclear test, using an advanced hydrogen bomb. The detonation is the latest escalation of tensions between North Korea and other countries including the US and its Asian allies, after Pyongyang sent a missile over Japan last week.
Gold had already seen some gains lately, having managed to break over the $1,300 (Dh4,771) per ounce barrier in late August, giving it its best monthly performance since January.
“It’s going to provide a further boost for gold prices, and the risk-off trade would be the predominant theme coming on Monday morning for equity markets because this brings the focus back on geopolitics,” said Naeem Aslam, chief market analyst at ThinkMarkets UK.
He added, “We believe the target of $1,350 would be very much achievable when it comes to gold prices; we see gold prices moving higher from there onward, and it will build on the momentum gained from August.”
A break above $1,350 could then take gold prices to $1,370.
Analysts said that one key factor that will impact investor sentiment would be the US’ and the UN’s response to the North Korean missile test.
In a series of tweets several hours after the test, US President Donald Trump described North Korea as a “rogue nation” and “a great threat”.
“North Korea has conducted a major nuclear test. Their words and actions continue to be very hostile and dangerous to the United States. North Korea is a rogue nation, which has become a great threat and embarrassment to China, which is trying to help but with little success,” Trump tweeted.
He added that “talk of appeasement” will not work with North Korea, which “only understand[s] one thing”.
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