Gold prices near one-year high in wake of North Korea nuclear test

(Reuters) - Gold prices climbed 1 percent to their highest in almost a year on Monday after North Korea’s latest and most powerful nuclear test drove investors towards safe-haven assets.

1 kg. gold bars are seen on a production line in Ahlatci Metal Refinery in the central Anatolian city of Corum, Turkey, May 11, 2017. REUTERS/Umit Bektas

Spot gold had risen just over 1 percent to $1,338.36 per ounce by 0708 GMT, after earlier touching its strongest level since late September at $1,339.47.

U.S. gold futures for December delivery were up 1 percent at $1,344 an ounce.

“Gold has rallied following further escalation in geopolitical tensions around North Korea,” said Jameel Ahmad, vice president of Market Research at FXTM.

“This looks like safe-haven buying from traders. These tensions do not look like they are going anywhere, and are likely to encourage investors to hold on to their gold positions,” Ahmad said.

North Korea on Sunday conducted its sixth nuclear test, of what it said was an advanced hydrogen bomb, prompting the threat of a “massive” military response from the United States if it or its allies were threatened.

The Japanese yen and sovereign bonds also climbed on Monday as North Korea’s nuclear test provoked a knee-jerk shift to safe havens, though equity losses were modest. [MKTS/GLOB] [USD/]

Adding to tensions, Russia on Sunday denounced the closure of three Russian diplomatic facilities in the United States as a “blatantly hostile act” that violated international law and demanded Washington reverse the order.

“Another plus for gold is that we don’t see an immediate rate hike and the shrinkage of the Federal Reserve’s balance sheet,” said Mark To, head of research at Hong Kong’s Wing Fung Financial Group.

On Friday, after a U.S. government report showed employers added fewer jobs in August than expected, traders held to expectations that the Federal Reserve would wait until the middle of 2018 before raising rates.

Gold is highly sensitive to rising interest rates, as these increase the opportunity cost of holding non-yielding bullion, while boosting the greenback.

Investors were also looking ahead to a European Central Bank (ECB) meeting on Thursday.

Markets are expecting no policy change from the ECB this month but the bank is likely to announce a reduction of its monthly asset purchases in October, according to a majority of economists in a Reuters poll.

Spot gold may gain more to $1,345 per ounce, as it has pierced a resistance at $1,333, Reuters technical analyst Wang Tao said.

Silver rose 1 percent to $17.85 an ounce, earlier touching its highest since late April at $17.90 an ounce.

Platinum gained 0.7 percent to $1,011.50. It had previously marked its best since early March at $1,014.70.

Palladium added 0.9 percent to $988.90, after earlier reaching its highest since February 2001 at $1,001.

Reporting by Apeksha Nair in BENGALURU; Editing by Joseph Radford and Tom Hogue