March 6, 2018 / 8:31 AM / 14 days ago

Gold firms as potential for North Korea talks hurts dollar

LONDON (Reuters) - Gold rose on Tuesday after North Korea signalled that it is open to nuclear talks, pressuring the dollar, while uncertainty over U.S. trade policy boosted interest in the precious metal as a safe store of value.

Gold bars are seen at the Kazakhstan's National Bank vault in Almaty, Kazakhstan, September 30, 2016. REUTERS/Mariya Gordeyeva/File Photo

The dollar fell half a percent against a currency basket on Tuesday after South Korea said the North is willing to hold talks with the United States on denuclearisation and will suspend nuclear tests while talks are underway.

That undercut interest in the currency as a haven from risk.

Spot gold rose 0.9 percent to $1,332.29 an ounce by 1500 GMT, while U.S. gold futures for April delivery gained 1.1 percent to $1,333.70.

“As a result of the weaker dollar, gold - together with oil and industrial metals - has benefited from the North Korean news,” said Saxo Bank’s Ole Hansen. “This (is) despite the potential for lowering the geopolitical risk should we move towards a denuclearised Korean peninsular.

“Spot gold is challenging a band of resistance between $1,327 and $1,332, with a break above signalling an extension towards $1,339.”

Stock markets clawed back more lost ground after the news on North Korea and as U.S. President Donald Trump faced pressure from political allies to pull back from steel and aluminium tariffs he proposed last week in a move that sparked a drop in equities and the dollar.

Worries over a potential trade war have eased somewhat in recent days, with market participants coming to view Trump’s proposed tariffs more as a negotiating tactic. Trump is expected to finalise the planned tariffs later in the week.

Uncertainty over the U.S. position on trade helped to keep the dollar on the back foot, however, and shored up interest in gold as a haven from risk.

“In the near term, given the unpredictable nature of current market sentiment, investors will continue to buy gold on dips to hedge the growing tail risk from Trump’s controversial policies,” said Stephen Innes, APAC trading head at OANDA.

Among other precious metals, silver was up 1.7 percent at $16.71 an ounce, platinum rose 0.5 percent to $965.90 and palladium was up 0.2 percent at $984.25.

Palladium has run into strong support at $975 an ounce, a key retracement of its Jan 2016-Jan 2018 rally, after falling more than 5 percent last week.

Additional reporting by Eileen Soreng in Bengaluru; Editing by Ed Osmond and David Goodman

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