Geopolitical concerns boosted the price of gold after U.S. President Donald Trump on Thursday announced his decision to call off a summit with North Korean leader Kim Jong Un scheduled for next month.
In a letter in to Kim released by the White House, Trump scrapped plans for what would have been a historic diplomatic summit, saying it was "inappropriate" at this time to have this meeting "based on the tremendous anger and open hostility" displayed in North Korea's most recent statements.
No serving American president has ever met with a North Korean leader, although former president Jimmy Carter did visit the Asian country in 1994. The U.S. and North Korea do not even have formal diplomatic relations and are adversaries dating to the 1950-1953 Korean War, which ended with an armistice and not a peace treaty
While Trump rejected the June Singapore meeting, he added that he still looks very much forward to meeting Kim "some day."
The yellow metal rose from $1,298/oz to $1,306.50 hitting the highest level since May 15, having the best performance in weeks.
“It seems obvious that the spike in gold is due to the cancellation of the summit with North Korea,” Brien Lundin, editor of Gold Newsletter, told MarketWatch.
Safe haven assets such as gold and the Japanese yen rise during times of political and financial uncertainty.
"The sustained uncertainty over (U.S.-North Korea) negotiations will likely add further upside to gold prices given safe-haven demand," OCBC analyst Barnabas Gan told Reuters.
“What we are noticing in the market is a sudden change in investor sentiment, where traders are becoming less inclined to look at riskier assets and are encouraged to safe havens instead,” Jameel Ahmad, global head of currency strategy and market research at FXTM told The Financial Times.
"Whenever there's fear in the world or uncertainty, people buy gold," said Allan Small, a senior investment adviser at HollisWealth told The Canadian Press "That's what they do."
Rising tensions between the US and North Korea have rattled investors in recent months. In August, Ray Dalio, the founder of the world's biggest hedge fund firm, BridgewaterAssociates, recommended that investors buy gold, citing US-North Korea concerns.
"Two confrontational, nationalistic, and militaristic leaders playing chicken with each other, while the world is watching to see which one will be caught bluffing, or if there will be a hellacious war," Dalio wrote in a LinkedIn blog post. "We can also say that if ... things go badly, it would seem that gold (more than other safe haven assets like the dollar, yen, and treasuries) would benefit."
Among other precious metals, silver for July delivery rose 28.2 cents, or 1.72 percent, to close at 16.687 dollars per ounce while platinum for July went up 11.8 dollars, or 1.31 percent, to settle at 912.60 dollars per ounce. All of those metals were on course for weekly gains.
After several weeks of relative calm in the markets investors appear to be bracing for rockiness ahead as volatility appears to be coming back with a vengeance. If tensions worsen between the US and North Korea, gold could be the big winner.