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Gold contract surges to five-month high amid rising global tensions



TORONTO — The price of bullion soared to a five-month high Tuesday as investors flocked to the safe haven amid rising global tensions, particularly between the U.S. and North Korea.

The June gold contract rose $20.30 at US$1,274.20 an ounce, hitting a level not seen since Nov. 8, when Donald Trump was elected U.S. president.

"There's no question about it that global uncertainty is driving the gold price today," said Stephen Carlin, managing director and head of equities at CIBC Asset Management.

North Korea said there could be "catastrophic consequences" after the U.S. ordered the USS Carl Vinson aircraft carrier and its battle group to waters off the Korean Peninsula. Tensions have been high after North Korea recently launched ballistic missiles.

On Tuesday, Trump tweeted that "North Korea is looking for trouble" and that he had recently asked China to help them solve the "North Korean problem."

Investors often buy more gold in volatile times, believing the precious metal is better at retaining its value compared to the stock market.

There was little movement on the North American stock markets, with the S&P/TSX composite index in Toronto down 3.68 points to 15,727.11.

The Dow Jones industrial average lost 6.72 points to 20,651.30, the S&P 500 index shed 3.38 points to 2,353.78 and the tech-heavy Nasdaq composite index declined 14.16 points to 5,866.77.

Carlin said investors have a "wait-and-see attitude" right now amid a dearth of economic data, and the beginning of the earnings season in the U.S.

In currencies, the Canadian dollar held steady at 75.01 cents US, a day before the Bank of Canada is set to make its latest interest rate announcement.

Analysts widely anticipate governor Stephen Poloz to leave the benchmark rate unchanged but will look to his commentary to see if the central bank has changed its future plans for rate hikes on signs of a stronger Canadian economy.

"If the bank comes out with a more hawkish outlook in regards to the rate, short term, it could be positive for the Canadian dollar," said Carlin.

In commodities, the May crude contract climbed for a sixth day in a row, up 32 cents at US$53.40 per barrel, while the May natural gas contract fell nine cents at US$3.15 per mmBTU. The May copper contract was unchanged at US$2.61 a pound.

The strength in oil prices comes after the Wall Street Journal, citing sources it said were familiar with the matter, reported that Saudi Arabia has told OPEC it wants to extend the group's production cuts for another six months.

OPEC members agreed in late November to cut its production by 1.2 million barrels a day, the first reduction agreed to by the 14-member cartel since 2008.

Eleven other non-OPEC oil-producing countries promised in December to cut an additional 558,000 barrels a day, reaching an overall reduction of 1.8 million barrels per day.

The cartel meets again in May.

— With files from The Associated Press.

 

Follow @LindaNguyenTO on Twitter.

Linda Nguyen, The Canadian Press

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