During the threat of war, the value commodities such as oil and gold are driven up as investors turn to it as a safe haven in times of geo-political crisis.
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That’s why it’s not all that surprising (albeit a little bit unnerving) that gold prices surged to the highest level in ten months this morning after North Korea escalated tensions by firing a ballistic missile over northern Japan.
The precious metal shot up to nearly $1,327 per ounce – the highest price since before the US presidential election in November last year. It looks like the missile launch has promoted investors to rush to safe haven its assets amid fears that this tension could trigger World War 3.
The missile from North Korea, thought to be a Hwasong-12, fell into the North Pacific Ocean after flying over the Japan’s Hokkaido Island. Japanese Prime Minister Shinzo Abe said that the move was an “unprecedented” threat to his country.
Hussein Sayed, chief market strategist at FXTM, said:
Although investors have become sensitised to such actions by [North Korean leader Kim Jong-un’s] regime, firing missiles over Japan is a rare occurrence and the message appears to be that North Korea is ready to escalate tensions.
Whether another round of global risk off will come into play, relies heavily on the US response. So far, no tweets are coming from President Trump’s account, nor are we seeing an official response from the White House administration. If Trump decides to escalate the matter and hint of a possible attack, the situation will become messy and lead to a severe sell off in risk assets.
I’m sure most of you reading this will probably not be effected by the price surge in gold, but you will no doubt be effected if the North Korean or US government decide to launch into war in the upcoming months. Let’s hope it won’t come to that, but with countries flexing their military muscles from every direction, things aren’t looking too great. The price of gold is the least of our problems right now.