Gold gains as investors flee risk assets

The latest North Korean missile launch has got investors fleeing risk assets, with stocks declining in favour of the yen and gold. With a tropical storm battering Texas, and the potential for a conflict with North Korea, plus the upcoming debt ceiling, markets are in for a rough ride.

• Global stocks retreat after latest North Korean missile
• Risk off sentiment pushes gold to nine-month high
• US spending in focus as Harvey continues to ravage Houston

There seems to be a widespread consensus between financial markets today, with the losses evident across equity markets indicative of a wider shift out of risk in response to the latest North Korean missile. The decision to send a rocket over Japan raises tensions once more, with the unpredictable Pyongyang leadership meaning that tensions can flare up at any moment. Put simply, this standoff has the potential to start a nuclear war if not handled correctly, and given Trump’s no-nonsense approach, that risk is very real.

The constant flare-up of tensions between North Korea and the US has driven demand for safe haven assets such as gold and the yen, with gold hitting a nine-month high this morning. Unsurprisingly it is the precious metals producers Fresnillo and Randgold who are providing the shining light in this sea of red on the FTSE 100. Considering the potential for either increased tensions or all-out war, there is little reason to believe that the ascent of gold prices will abate anytime soon.

European currencies have punched higher once more today, with the dollar declining as the Tropical Storm Harvey continues its assault on Houston, Texas. With the budget still a bone of contention, Trumps proposition to cut FEMA funding to provide greater resources for the military looks foolhardy at best. While many Republicans in Congress refused to cut FEMA funding, it looks as if there may be a need to raise, rather than cut FEMA funding, thus putting pressure on other areas of US spending. With FEMA spending in focus, and Trump promising that ‘all options are on the table’ for North Korea, it seems Trump is going to have to drive the US into the debt ceiling before he even begins to
 address any of his election promises.