By Amrith Ramkumar
Gold prices continued rising Tuesday, as the latest U.S. response to a North Korea nuclear test and comments from a Federal Reserve official urging caution pushed investors toward the haven asset.
Gold for December delivery was recently up 0.9% at $1,342.00 a troy ounce on the Comex division of the New York Mercantile Exchange. Prices have risen to their highest level in almost a year recently as tensions between the U.S. and North Korea have escalated and many investors have become skeptical that the Fed will raise rates one more time this year amid sluggish inflation.
On Tuesday, President Donald Trump tweeted that he is allowing Japan and South Korea to buy "a substantially increased amount" of military equipment from the U.S. That came after South Korea warned Monday that North Korea appears to be preparing to test another intercontinental ballistic missile and U.S. Ambassador to the U.N. Nikki Haley called for "the strongest possible measures" against North Korea.
North Korea said it conducted a sixth and significantly larger nuclear test on Sunday. The tensions have supported gold in recent sessions since many investors favor the precious metal during times of geopolitical uncertainty.
Also on Tuesday, Fed governor Lael Brainard said in a speech that the U.S. central bank should be cautious about raising short-term interest rates further until policy makers are confident of overcoming the "persistent failure" to reach 2% inflation. The comments supported gold prices by adding to existing doubts about the Fed raising rates for a third time in 2017. Gold often struggles to compete with yield-bearing assets like Treasurys when borrowing costs rise.
"It's a perfect environment right now for gold to see some higher levels, " said Bob Haberkorn, senior market strategist at RJO Futures.
A weaker dollar also supported gold prices Monday, as the dollar-denominated metal becomes cheaper to foreign buyers when the U.S. currency falls. The WSJ Dollar Index, which tracks the dollar against 16 other currencies, was recently down 0.5%.
Among base metals, copper for December delivery was recently up 1.2% at $3.1555 a pound. Synchronized global economic growth has pushed prices for the industrial metal to three-year highs, and strong manufacturing data out of China -- the world's largest copper consumer -- last week has given copper its latest boost.