Gold Edges Lower After Geopolitical Spike

The greenback rose on Monday as investors regained appetite for risk after the US and North Korea appeared to take a break from their respective war rhetoric.  Over the weekend, US Secretary of State Rex Tillerson sought to downplay the risk of a conflict, saying the Trump administration was seeking a diplomatic settlement.

Last week’s tensions helped gold notch its strongest weekly performance in four months to settle at its highest level since the first week of June.  However, actions by China to impose additional sanctions on North Korea have re-established a semblance of calm, causing gold prices to retreat and pullback lower. Gold was last seen around $1275 per troy ounce, close to 2.00% below the prior week’s highs. Strong support around the $1270-mark could see buyers potentially re-enter the market if tensions remain elevated.

The Reserve Bank of Australia renewed its focus on mounting housing debt, even as it removed the country’s labour market from its watch list.  Minutes from the Central Bank’s August meeting released overnight showed that the RBA remained confident of an uptick in inflation and jobs as it held interest rates at record lows this month. Yet, record high household debt and a strong Australian dollar were cited as key risks to the rosier outlook. Indebtedness has increased in the country as more Australians speculate in the booming property market.

The Central Bank also warned that any further rally in the local currency, which last month climbed to a 2-year peak against the US dollar, could depress consumer price growth and weigh on overall economic expansion and employment. The AUDUSD pair was last seen trending around the 0.7840 after slipping ahead of the European open.