August 21, 2017 / 10:29 AM / a month ago

PRECIOUS-North Korea tensions push gold prices higher

    * U.S., South Korea begin joint simulated military drills
    * Investors look to Jackson Hole meeting
    * Palladium at 16-1/2-year high

 (Updates prices; adds comment, second byline, NEW YORK
dateline)
    By Marcy Nicholson and Peter Hobson
    NEW YORK/LONDON, Aug 21 (Reuters) - Gold rose on Monday as
geopolitical tensions over North Korea fueled safe-haven demand,
while doubts about U.S. President Donald Trump's ability to
enact pro-business policies pushed U.S. bond yields and the
dollar lower.                                            
    Investors braced for North Korea's response to
computer-simulated military exercises begun by South Korean and
U.S. forces on Monday that will continue until Aug. 31.
            
    "Gold is being supported by the war games and the
uncertainty in Washington," said Saxo Bank analyst Ole Hansen. 
    Spot gold        was up 0.6 percent at $1,292.18 an ounce by
1:54 p.m. EDT (1754 GMT). This was within sight of Friday's
brief nine-month-high at $1,300.80, which came after attacks in
Spain and rising fears over Trump's ability to push through tax
reform and investment.
    U.S. gold futures         for December delivery settled up
0.4 percent at $1,296.70
    Hansen said gold could fall further due to a large build-up
of speculative long positions in COMEX futures.             
    Sam Laughlin, a trader at MKS PAMP, said gold could attempt
to rise above $1,300, but that "any corrective moves through
$1,280-$1,285 have the potential to extend toward $1,265."
    Investors looked ahead to an annual meeting of central
bankers this week in Jackson Hole, Wyoming, with European
Central Bank President Mario Draghi and U.S. Federal Reserve
Chair Janet Yellen to speak on Friday. 
    Fed officials have indicated they intend to raise interest
rates again this year, while sources told Reuters that Draghi
would not deliver any fresh policy messages.             
            
    Gold is sensitive to rising interest rates because they
increase bond yields, raising the opportunity cost of holding
non-yielding bullion, and tend to boost the dollar, in which
gold is priced.
    A gauge of world stock indexes                 touched a
5-1/2-week low and the dollar        fell against a basket of
six major currencies, including the yen       , due to tension
with North Korea and as investors braced for the banking
meeting.                   
    Autocatalyst metal palladium        was 1.2 percent higher
at $934.22 an ounce, after reaching $938.50, its highest since
February 2001, helped by a rally in industrial metals.        
    "Demand for both palladium sponge (industrial use) and ingot
(investment use) is strong despite the increase in price-elastic
supply from the scrap market," said Standard Chartered in a
note.
    "Palladium's biggest risk in the near term is elevated
speculative positioning, and potential profit-taking, but
constructive market fundamentals are keeping this risk at bay,
for now."
    Silver        was up 0.6 percent at $17.02 an ounce, while
platinum was 0.4 percent higher at $978.49.         

 (Additional reporting by Apeksha Nair in Bengaluru; Editing by
Marguerita Choy and Dale Hudson)
  

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