Gold prices were up 1% in morning trading after comments from North Korea’s foreign minister on Monday. The foreign minister was responding to a tweet from U.S. President Donald Trump in which he referred to the comments as a “declaration of war”. Tensions between the two countries reignited after the United Nations speech by Donald Trump in which he threatened once again to wipe out North Korea if it threatened the United States.
After experiencing a steady losing streak since the beginning of September gold has rebounded on the news. Shares of B2Gold Corp. had climbed 6.42% heading into the noon hour on September 25. Yamana Gold Inc. (TSX:YRI)(NYSE:AUY) stock was up 2.08% at the same time. Gold equities had been suffering along with the base price for much of September.
North Korea is not the only factor that has driven gold prices to a September correction. The Federal Reserve concluded its two-day meeting last week and chair Janet Yellen projected one more rate hike to come in 2017. Odds for a December rate hike are now above 70% in spite of weaker-than-expected U.S. job growth and surprisingly gentle inflationary conditions.
A rate hike should help a U.S. dollar that has fallen for much of 2017. There is little reason to believe the North Korea-U.S. bout of brinksmanship will descend into full scale war. Rising rates and a recovering dollar will make it difficult for gold to reach the vaunted $1,400 mark by the end of this year.
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