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Gold's 'safety' lift fades, leaving weekly retreat intact
MARKETWATCH 8:09 AM ET 09/15/17
North Korean missile test, London attack provide some floor for metals

Gold prices on Friday gave up the initial pop higher that followed another missile test in North Korea, leaving the precious metal on track to end with a weekly loss and marking a solid retreat from the one-year highs scored just last Friday.

Gold was churning amid a slim decline for the dollar and a recovery for stock indicators from their immediate reaction to North Korea. Still, gold remains underpinned by geopolitical tensions on the Korean Peninsula and as a reported terrorist attack using explosives ripped through a London Underground line (http://www.marketwatch.com/story/terror- explosion-on-london-underground-train-injures-passengers-2017-09-15) on Friday, injuring more than a dozen people.

The latest headlines out of Asia "further increases geopolitical tensions in the region, which had abated somewhat of late. Gold is thus in demand as a safe haven," said Carsten Fritsch and the commodities research team at Commerzbank, in a note.

Monetary policy factors remain at work as well.

"Yesterday saw [spot] gold dip briefly to a two-week low of $1,315 following the publication of U.S. inflation figures that were somewhat higher than expected," Fritsch said. "That said, this has done virtually nothing to change the market's rate-hike expectations" that put moderate odds on another hike yet this year.

Gold for December delivery was recently down $3.20, or 0.2%, to $1,326.10 an ounce. Futures had climbed as high as $ 1,338.20 earlier Friday. The eventual pullback takes the contract back near its lowest levels so far for September, according to FactSet Data.

The retreat in gold this week--it's looking at a roughly 1.8% drop for the week--followed its finish last Friday at its highest (http://www.marketwatch.com/story/gold-trades-at-highest-in-a-year-boosted-by-bruised-dollar-and-sinking- treasury-yields-2017-09-08) since Sept. 6, 2016.

In other early Friday action, the SPDR Gold Shares ETF(GLD) was trading 0.3% lower.

The ICE U.S. Dollar Index was down 0.1%, while stocks steadied (http://www.marketwatch.com/story/dow-futures-steady- paring-losses-that-came-after-latest-north-korean-missile-2017-09-15) after earlier declines. Gold tends to move inversely to both the dollar and stocks.

North Korea fired a missile over Japan early Friday (http://www.marketwatch.com/story/un-security-council-to-hold- emergency-meeting-after-latest-north-korean-missile-test-2017-09-14) local time for the second time in a month, defying rising international efforts to force it to abandon course. In a rare move, South Korea responded to the launch by immediately conducting a simulated strike of the North Korean launch site, an air base near Pyongyang. In Japan, alerts were sent to smartphones of people living in areas where the missile was projected to pass over soon after the launch was detected. No damage or injuries were reported.

The latest missile launch marked Pyongyang's latest provocation after the United Nations Security Council on Monday unanimously adopted new sanctions against the country.

Data Thursday showed the consumer-price index rose 0.4% in August (http://www.marketwatch.com/story/higher-rents-gas- boost-inflation-in-august-cpi-shows-2017-09-14)for the biggest rise since January. The rise lifted the yearly increase in inflation to 1.9% from 1.7%.

(http://www.marketwatch.com/story/us-stocks-set-to-lose-grip-on-all-time-highs-2017-09-13)Read:Gold bulls are looking for a 'major breakout' above $1,400 an ounce (http://www.marketwatch.com/story/gold-bulls-are-looking-for-a-major- breakout-above-1400-an-ounce-2017-09-08)

The Fed has been concerned with the weak inflation readings over recent months, raising some doubts that the central bank will hike rates again this year. However, if inflation starts to pick up again in coming months, expectations for a December rate increase are likely to be rekindled, as select Fed members have insisted they want policy to be a step ahead of inflation.

The Fed raised interest rates twice this year in response to steady growth and falling unemployment. Higher rates boost the dollar, in which gold is priced. A rising interest-rate climate tends to dull the appeal of nonyielding bullion.

-Rachel Koning Beals; 415-439-6400; [e-mail]


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