North Korea said on Monday it had successfully conducted a newly developed mid-to-long range missile test on Sunday, supervised by leader Kim Jong Un and aimed at verifying the capability to carry a "large scale heavy nuclear warhead." "It (North Korea's missile test) is underpinning support for gold but at the moment its obviously not escalated to the point where investors are becoming overly worried about," said ANZ analyst Daniel Hynes.
"It (North Korea-US relations) has been an issue for sometime. Throwing in Trump into the mix sends a bit of ambiguity into the market. So subsequently (investors are) a bit more cautious about the outcome than they have been in the past." Traders are expecting an almost 100 percent probability of an interest rate increase in June, CME Group's FedWatch showed.
Gold is highly sensitive to rising rates, which lift the opportunity cost of holding non-yielding assets such as bullion, while boosting the dollar, in which it is priced. Spot gold may end its current bounce in a narrow range of $1,229 to $1,236.60 per ounce, and then revisit its May 9 low of $1,214, according to Reuters technical analyst Wang Tao.
Copyright Reuters, 2017