September 5, 2017 / 7:37 PM / 20 days ago

PRECIOUS-Gold jumps to one-year high as geopolitical risks grow

    * N.Korea seen moving ICBM -S.Korean media
    * Events in Washington played larger role in gold rally
-Goldman
    * Palladium off its highest since Feb. 2001
    * GRAPHIC-2017 asset returns: tmsnrt.rs/2jvdmXl

 (Adds comments, market moves, updates prices; adds NEW YORK
dateline)
    By Devika  Krishna Kumar and Zandi Shabalala
    NEW YORK/JOHANNESBURG, Sept 5 (Reuters) - Gold prices
climbed to a one-year high on Tuesday as the U.S. dollar eased
and safe-haven buying demand remained robust due to continued
concerns over North Korea's nuclear tests.
    Wall Street stocks fell as U.S. trading reopened for the
first time since North Korea's biggest nuclear bomb test yet,
and the U.S. dollar and Treasury yields fell.            
    The U.S dollar was also driven lower by a Federal Reserve
official's comments about low U.S. inflation, hit a one-week low
against the Japanese yen and was on track for its biggest
decline in eight days against a basket of currencies.
                         
    Spot gold        was up 0.6 percent at $1,341.86 an ounce by
3:19 p.m. EDT (1919 GMT), after peaking at $1,344.21, its
highest since Sept. 8, 2016.
    U.S. gold futures         ended the session up 1 percent at
$1,344.50.
    South Korea said an agreement with the United States to
scrap a weight limit on its warheads would help it to respond to
the threat from North Korea after Pyongyang conducted its sixth
and largest nuclear test two days ago.             
    North Korea has been observed moving what appeared to be an
intercontinental ballistic missile (ICBM) towards its west
coast, South Korea's Asia Business Daily reported.              
  
    "Gold is still in demand as a safe haven," Commerzbank said
in a note.
    "It is thought that the missile may be fired before the
country celebrates its Foundation of the State Day on 9
September. This further raises geopolitical tensions in the
region."
    Much of gold's recent strength can be attributed to the
flight to assets perceived as being at less risk from
geopolitical uncertainty that has been stoked up by events in
the Korean peninsula.     
    However, Goldman Sachs said events in Washington over the
past two months play a far larger role in the recent gold rally
followed by a weaker dollar.
    "In coming months, the unfortunate aftermath of Hurricane
Harvey suggests that Washington is going to have to overcome
their differences, pass spending bills, try harder to avoid a
government shutdown and pursue infrastructure projects sooner
than later." the analysts said.
    "Our economists believe the probability of a government
shutdown has declined further from their prior assessment of 35
percent and now put it at around 15 percent."
    Lawmakers returning to Washington after a month-long break
are expected to swiftly agree to an initial request for nearly
$8 billion in disaster aid after Harvey, with the House of
Representatives considering assistance on Wednesday.
            
    Goldman said it maintains its end-of-year gold price
forecast of $1,250 per ounce barring a substantial escalation in
North Korea.    
    Holdings in the world's largest gold-backed exchange-traded
fund, SPDR Gold Shares GLD, rose on Friday to help underpin 
prices.           
    Among other precious metals, silver        was little
changed at $17.89 an ounce, while platinum        inched up 0.1
percent to $1,007.90.
    Palladium        fell 1.4 percent to $963.23 after reaching
its highest since February 2001 at $1,001 in the previous
session.

 (Reporting by Devika Krishna Kumar and Zandi Shabalala; Editing
by Marguerita Choy and Louise Heavens)
  

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