Gold, the yen and the Swiss franc tumble as North Korea backs down on threats against the US

Courtney Goldsmith
Follow Courtney
Activists Hold Peace Rallies Protesting Against President Trump's Threats To North Korea
Safe haven assets rose last week as the geopolitical tension increased (Source: Getty)

Gold and other safe haven assets retreated this morning as the threat of a nuclear stand-off between North Korea and the US eased.

Kim Jong Un, the leader of North Korea, said he would wait to see what the US does next before he decides whether or not to fire a missile towards Guam, according to state media.

Investors moved away from safe havens towards riskier assets like equities, sending the price of the precious metal down 0.84 per cent, below the key $1,280 mark to $1,279.60 per ounce. Spot gold prices were down 0.6 per cent at $1,274.31 per ounce this morning.

Read more: Trump tells Guam governor that North Korea threats will boost tourism

"Gold – the ultimate traditional safe haven – is on course for a second day of losses," said Craig Erlam, senior market analyst at Oanda.

"Assuming we don’t see another flare up in the war of words between the two countries – or worse – then gold could remain under pressure in the days ahead, although traders are understandably cautious still."

Henry Croft, research analyst at Accendo Markets, said gold could also be tested by a strengthening US dollar.

"The precious metal has found some support at $1,272, allowing some reprieve from the sell-off. However should the greenback continue its rally and safe-haven asset demand further diminish, the support could be tested this morning."

Read more: Gold, defence firms and the Vix are up after Trump's North Korea threats

Meanwhile, the Japanese yen erased earlier gains against the US dollar, falling 0.58 per cent. The Swiss franc, another safe haven asset, fell 0.08 per cent against the euro.

"Today’s statement from North Korea, coming after a more conciliatory tone from the US administration yesterday, may help to de-escalate the threat of conflict and reassure investors after a nervous few days," said Stuart Culverhouse, global head of macro and fixed income research at the specialist frontier markets investment bank Exotix Capital.

"There remains a risk of a renewed war of words, if not worse, but this outbreak of calm may be something to build on in terms of dialogue," he added.

South Korea's president Moon Jae-in also called for peace today and added that there would be no military action without Seoul's consent.

Read more: China to stop importing key North Korean goods

Related articles