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Gold starts the week higher amid worries over North Korea

5/15/2017, 3:08:58 PMTrading Strategies
Gold starts the week higher amid worries over North Korea

Gold prices inched higher in European trade on Monday, kicking the week off with gains after another missile test by North Korea underpinned demand for safe-haven assets.

Comex gold futures rose around $4.00, or about 0.3%, to $1,231.80 a troy ounce by 2:55AM ET (06:55GMT). Meanwhile, spot gold was at $1,232.00.

The yellow metal notched a third-straight winning session on Friday, a feat it had not achieved since mid-April, following the release of underwhelming U.S. retail sales and inflation data.

Market participants kept a wary eye on developments in North Korea, which successfully conducted a newly developed mid-to-long range missile test on Sunday aimed at verifying the capability to carry a "large scale heavy nuclear warhead."

The hermit state fired a ballistic missile that landed in the sea near Russia on Sunday in a launch that Washington called a message to South Korea, days after its new president took office pledging to engage Pyongyang in dialogue.

The United Nations Security Council is due to meet on Tuesday to discuss North Korea's latest missile launch, diplomats said on Sunday, which was requested by the U.S. and allies South Korea and Japan.

The news bolstered demand for perceived safe-havens such as the yen, U.S. Treasurys and gold.

Prices for the precious metal held on to broad gains from Friday, when lackluster U.S. data on retail sales and inflation saw investors temper expectations for more rate hikes by the Federal Reserve.

Markets are pricing in around a 67% chance of a hike at the Fed's June meeting, according to Investing.com’s Fed Rate Monitor Tool, down from around 80% at the start of last week.

The metal is highly sensitive to rising U.S. interest rates, which increase the opportunity cost of holding non-yielding bullion while boosting the dollar, in which it is priced.

Key U.S. economic data in the week ahead could provide further evidence if the world’s largest economy is strong enough to withstand a rate hike as early as next month, with the Empire State and Philly Fed manufacturing surveys in focus.

Also on the Comex, silver futures gained 19.0 cents, or about 1.2%, to $16.59 a troy ounce.

Elsewhere in metals trading, platinum tacked on 1.5% to $931.10, while palladium added 1% to $811.25 an ounce.

Copper futures advanced 1.6 cents to $2.540 a pound, as investors shrugged off a raft of disappointing economic data from China.

China's growth took a step back in April after a surprisingly strong start to the year, as factory output to investment to retail sales all tapered off as authorities clamped down on debt risks in an effort to stave off a potentially damaging hit to the economy.