Gold buoyed as Trump, Kim ‘playing chicken’

Bloomberg

Sun, Aug 13, 2017 - Page 14

Gold advanced to the highest in two months as the spike in tensions between the US and North Korea fanned demand, with hedge fund billionaire Ray Dalio flagging rising risks including “two confrontational, nationalistic and militaristic leaders playing chicken with each other.”

Bullion for immediate delivery on Friday rose 0.4 percent to US$1,292.10 an ounce, the highest since June 7.

It traded at US$1,286.10 by 11am in New York, according to Bloomberg generic pricing.

The metal is up 2.2 percent this week, and 12 percent this year.

Gold is among this year’s best-performing commodities as investors weigh geopolitical risks and a weaker US dollar.

US President Donald Trump intensified warnings to North Korea this week, boosting haven demand as he promised a massive response to any strike against the US or its allies.

Dalio, who manages Bridgewater Associates, said in a LikedIn post that emerging risks are more political than economic, which made them challenging to price.

“Gold remains in demand as a safe haven and is still on the up,” analysts at Commerzbank AG, including Eugen Weinberg, wrote in a note.

The US consumer price index last month rose 1.7 percent from a year earlier, a report showed on Friday, trailing the 1.8 percent median estimate of economists surveyed by Bloomberg.

A more sustained ebb in price pressures could make it tougher for the US central bank to stay on course for one more rate increase this year.

Low rates boost the appeal of gold, which does not pay interest.

On Thursday, New York Fed President William Dudley said that it will “take some time” for inflation to reach the central bank’s 2 percent target, the latest official warning that price pressures remain muted.

In his post — which was decorated with a photograph of a gathering storm — Dalio recommended investors consider placing 5 to 10 percent of their assets in gold as a hedge against political and economic risks.

In addition to the North Korean situation, Dalio also wrote that he sees rising odds of US Congress failing to increase the US debt ceiling, leading to a technical default.

As Trump and North Korean leader Kim Jong-un trade barbs, Dalio wrote that “the world is watching to see which one will be caught bluffing, or if there will be a hellacious war.”

“When it comes to assessing political matters [especially global geopolitics like the North Korea matter], we are very humble. We know that we don’t have a unique insight that we’d choose to bet on,” he added.

Other precious metals:

Spot silver posted the biggest weekly advance in more than a year.

Platinum gained, extending the longest run of weekly gains in a year, while palladium was little changed on Friday.