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Investors pile into gold as Korean tensions escalate

LONDON (Reuters) - Gold prices jumped to their highest in nearly a year on Monday as escalating tensions between North Korea and the United States and a weaker dollar persuaded investors to take refuge in assets perceived to be safe.

Spot gold XAU= hit $1,339.47 on Monday, its highest since Sept. 27 last year, a time when the metal was benefiting from a surge of interest following Britain’s vote to leave the European Union.

Prices of the precious metal used as a hedge against political and financial turmoil are up more than 7 percent this quarter and more than 16 percent this year.

Investor interest can be seen in the holdings of physically-backed exchange traded funds, which at 54.757 million ounces are up more than three percent since Aug. 8.

North Korea on Sunday conducted its sixth and most powerful nuclear test, which it said was of an advanced hydrogen bomb for a long-range missile, prompting the threat of a “massive” military response from the United States if it or its allies were threatened.

“The war risk helped gold and it has been bid because of the weaker dollar,” said Andrew Cole, a fund manager at Pictet Asset Management, adding he saw “further upside”.

Cole said Pictet’s Dynamic Asset Allocation Fund with nearly $590 million under management has four percent of its holdings in physical gold and 3.5 percent in gold mining stocks.

The U.S. currency against a basket of other major currencies recently fell towards 90, to its lowest since January 2015, largely due to speculation the Federal Reserve is unlikely to raise interest rates as quickly as anticipated. 

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MARKET SUMMARY

INDICES

Name Last Change
DOW 23358.20 0.43%
S&P 500 2578.85 0.26%
NASDAQ 6782.79 0.15%
TSX 15998.57 0.40%
TSX-V 799.35 0.00%

Resource Commodities

Name Last Change
Gold 1294.20 1.20%
Silver 17.31 1.33%
Copper 3.06 0.62%
Platinum 952.00 1.56%
Oil 56.55 2.49%
Natural Gas 3.10 1.42%
Uranium 24.25 N/A
Zinc 1.45 0.00%

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