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Gold surges as USA and North Korea ratchet up nuclear tensions

13 August 2017

USA stocks closed lower on Tuesday after Trump's vow to respond aggressively to any North Korean threats triggered a late afternoon selling spree.

US President Donald Trump added to the heat by tweeting that "Military solutions are now fully in place, locked and loaded, should North Korea act unwisely".

The CBOE Volatility Index .VIX , a barometer of expected near-term stock market volatility, closed at its highest since the election.

Escalating tensions around Pyongyang's nuclear ambitions sent a shiver through markets worldwide and pushed the dollar to below 109.7 yen in afternoon forex trade to an eight-week low against the safe haven currency, piling more pressure on Japanese stocks. "That did temporarily shake investors' complacency, but we think markets are ready to move higher in the back half of the year, and earnings and economic data are going to drive that".

SeaWorld Entertainment slid 6.2 percent after the theme park operator reported second-quarter revenue that fell short of Wall Street's expectations. The dollar index slipped to a one-week low on Friday after the United States data.

North Korea responded to the threat with a promise to land missiles near the US Pacific territory of Guam.

USA crude shed 20 cents to $48.97 a barrel, while Brent crude fell 26 cents to $51.88 a barrel.

The Swiss franc had also risen more than 1 percent against the euro on Wednesday, recording one of its largest single-day jumps against the euro since the Swiss National Bank removed its cap on the Swiss franc in January 2015.

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Gold was up $3 at $1293 an ounce, adding to 2-month highs.

The overall financials group, which accounts for roughly a third of the index, declined 1.4 per cent, while energy shares also fell 1.4 per cent as oil prices turned down.

A Reuters Datastream index of more than 7,000 stocks across the globe saw its market capitalization drop from a record high $61.36 trillion on Monday to $60.43 trillion at the close on Thursday. Amid this renewed flare-up in tensions with North Korea, Capital Economics chose to take a look at how the precious metal has responded to geopolitical risk events since 1985.

BONDS: Bond prices were rose.

Nevertheless, traditional safe havens jumped, with the benchmark 10-year US note yield hitting its lowest level since June 28 and gold futures surging more than 1 percent.

Bond prices rose. The yield on the 10-year Treasury note slipped to 2.20 percent from 2.25 percent late Wednesday. Tokyo's Nikkei 225 share index closed down 1.3% at its lowest since June 1 as the strong yen hit exporters, while South Korea's KOSPI index fell 1.1% to seven-week lows. The benchmark S&P/ASX 200 Index and the broader All Ordinaries Index fell around 1.2% each to finish at 5,693.10 and 5,743.50, respectively.

Mining heavyweights BHP Billiton and Rio Tinto retreated 2-3%, while gold miners Evolution and Newcrest rose about 2% each.

Gold surges as USA and North Korea ratchet up nuclear tensions