Gold rallies on new threats from North Korea
By Polya Lesova, MarketWatch
Last Update: 4:13 PM ET Jul 6, 2006
NEW YORK (MarketWatch) -- Gold futures closed at their highest level since June 5 as tensions between North Korea and the West continued to escalate after Pyongyang threatened Thursday to test more missiles.
After a weak opening, gold for August delivery reversed course midmorning and closed up $6.60 at $636.30 an ounce on the New York Mercantile Exchange.
Other metals prices also posted gains. Silver added 17.20 cents at $11.507 an ounce, platinum edged up $1 to $1,249.60 an ounce and palladium rose $3.15 at $330.85 an ounce. Copper added 22.0 cents at $3.7145 a pound.
Global tensions will provide further upside momentum, because investors are attracted by gold's safe-haven qualities, said James Moore of TheBullionDesk.com.
The mounting tensions surrounding North Korea's nuclear ambitions were a key driver, said analysts. South Korean media reported that North Korea might be preparing to test-launch as many as four more missiles.
"The resolve and bravado coming from Pyongyang has caught many complacent market (and political) analysts off-guard," said Jon Nadler, investment-products analyst at Kitco.com.
North Korea tested seven missiles on Wednesday, prompting an emergency meeting of the U.N. Security Council at which Japan sponsored a draft resolution condemning the launches and urging Pyongyang to "immediately cease the development, testing, deployment and proliferation of ballistic missiles and reconfirm its moratorium on missile launching."
China and Russia, who both have veto power, said that they would support a more tempered resolution that excluded the threat of sanctions.
"Gold quickly reaffirmed its role of the safe harbor for one's wealth as soon as the geopolitical skies turned to a menacing shade of grey," Nadler said. He added that there might be some volatility ahead.
Gold is holding above $600, looking stronger than most expected, said Julian Phillips, an analyst at GoldForecaster.com.
"The gold market is evolving out of itself into part of the global money scene," Phillips said. "This means investment funds are coming in on the dips."
On the currency markets, the dollar fell after the European Central Bank kept its key rate at 2.75%, but President Jean-Claude Trichet referred to "strong vigilance" in his description of price risks. In the past, the phrase "strong vigilance" has indicated a rate increase at the next bank meeting.
On the supply side, gold stocks were unchanged at 8.03 million troy ounces as of late Wednesday, according to Nymex data. Silver supplies rose by 1.3 million troy ounces to 103.6 million and copper inventories were flat at 7,903 short tons.
The indexes tracking the metals sector posted gains. The Amex Gold Bugs Index (HUIHUI
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) added 1.2% to close at 346.62 and the CBOE Gold Index (GOXGOX
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) rose 1.5% to end at 150.79. The Philadelphia Gold and Silver Index ($XAU$XAU
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) finished the session at 147.67, up 1.2%.
Metals exchange-traded funds were also higher. The StreetTracks Gold Trust ETF (GLDGLD
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) rose 0.8% to close at $62.98, the iShares Silver Trust ETF (SLVSLV
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) added 1.1% to close at $115.99, and the Market Vectors-Gold Miners ETF (GDXGDX
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) closed up 0.8% at $39.70.
