But the metal still recorded its second consecutive weekly decline after the Federal Reserve on Wednesday reiterated that it expects to deliver another rise in interest rates by the end of the year down gold prices.
Prices for the yellow metal dropped about 1.7 percent last week, posting their second consecutive weekly decline.
Gold futures witnessed nominal gains, with heightened tension pegged to North Korea credited with providing a modicum of support to the haven.
Late Thursday, North Korean officials threatened to test a hydrogen bomb over the Pacific Ocean, escalating tensions in the Korean Peninsula. North Korea’s leader Kim Jong Un criticized President Donald Trump for remarks made during the U.S. leaders U.N. speech Tuesday, in which he threatened to “totally destroy” Pyongyang if provoked.
Gold prices would have crashed to $1,265.60 if North Korean risk didn’t resurface and would have taken prices back to levels last seen more than a month ago.
But the Fed, which indicated Wednesday that it still plans to raise rates once more by the end of the year, was the reason why gold prices fell.
The central bank also announced that a plan to unwind its more than $4 trillion balance sheet would commence in October. Both policy measures can have the effect of tightening monetary policy and raise rates. Higher rates in turn can make gold, which doesn’t bear a yield, less attractive compared with assets with rising yields.
Gold opened lower in early Asian tradin as weekend uncertainty passed without incident. Merkel’s win in the German federal elections and a quiet news weekend on the North Korean front, saw the US dollar opening stronger and gold’s weekend safe-haven premium eroded from Friday
The spot gold price fell during Asian morning trading hours on Monday September 25, as the dollar strengthened and a quiet weekend on the North Korean front saw a further deterioration in any risk-off sentiment.
Gold prices dropped on Monday, and hovered around one-month lows hit last week, weighed down by a firm U.S. dollar and as concerns over the Korean crisis eased over the weekend.
Merkel’s win in the German federal elections and a quiet news weekend on the North Korean front, saw the U.S. dollar opening stronger and gold’s weekend safe-haven premium eroded from Friday.
The euro slipped on Monday after German Chancellor Angela Merkel won a fourth term in a weekend election, but faced leading a much less stable coalition in a fractured parliament as support for the far-right party surged.
Last week, the Fed announced it would begin trimming down its $4.5 trillion in assets and signalled it will likely raise rates again this year. With the market increasingly expecting another US rates rise by year-end, this should continue to lend support to the dollar down gold prices tis pushing down gold prices further.