Gold Extends Rally to `17 High as North Korea Test Adds to Angst

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

An index of the greenback touched the lowest since January 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 $1,000 an ounce for the first time since March.

“Gold prices have rallied to their highest level since U.S. 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 percent to $1,314.23 an ounce at 1:57 p.m in New York, according to Bloomberg generic pricing. The metal gained as much as 1.2 percent to $1,326.08 an ounce, the highest since Nov. 9. Gold futures for December delivery climbed 0.3 percent to settle at $1,318.90 at 1:42 pm on the Comex in New York.

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

Gold has surged almost 15 percent 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 U.S. 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 percent, down from more than 50 percent 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 U.S. natural disaster since Hurricane Sandy in 2012.

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

Click here for a QuickTake explainer on N. Korea’s nuclear ambitions