Gold spirals on brewing tension between USA, N Korea

The FTSE 100 index dropped 1.1 per cent to a three-month low on Friday amid rising geopolitical tensions, with financials, miners and energy firms the biggest weights among blue chips.

"Although it is considered highly unlikely that this tension will escalate into a nuclear war, the market still needs to see how President Trump will eventually deal with his advocating "fire and fury" against North Korea's threat", said Margaret Yang Yan, market analyst at CMC Markets Singapore.

United States stocks ended lower on Thursday, and Asian markets fell sharply, with Hong Kong's Hang Seng index dropping 2%.

Gold surged by Rs 30 to Rs 30,050 per ten gram at the bullion market today on the back of mounting tension between the U.S. and North Korea, and persistent buying by local jewellers.

Developments regarding the situation with North Korea may remain in focus next week, although traders are also likely to keep an eye on reports on retail sales, housing starts, and industrial production.

Stocks around the world fell sharply on Thursday and investors moved into the yen, gold and other safe-haven assets amid more aggressive talk between the United States and North Korea.

The dollar index.DXY, which tracks the greenback against six rival currencies, was down 0.17 percent to 93.391. Australia's S&P/ASX 200 dropped 1.2 percent, while Japan was closed on a public holiday. "This provides an excuse key in hand for investors to cash in profits, or at least to contain for the moment their fever buying in a market where many think it was ripe for a downturn", said Patrick O'hare of Briefing.

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The CBOE Volatility Index .VIX , a barometer of expected near-term stock market volatility, closed at its highest since the election.

News that US producer prices unexpectedly fell in July earlier helped send the dollar lower.

The indicated US market moves reflect a selloff across global stock markets Friday.

Markets in Italy, France and Germany also saw declines.

Shanghai posted its biggest one-day drop since December while Seoul stocks again ended deep in negative territory and the won continued its slide against the dollar. Following two days of meetings in Abu Dhabi, leading producers reiterated their commitment to output caps set earlier this year to support prices.

"We're still close to the all-time high so that makes people a little nervous too, so they might say now might be the time to take a little bit of money off the table". As a result, the yield on the benchmark ten-year note, which moves opposite of its price, dipped by 2.3 basis points to 2.189 percent.

The September crude contract was up 20 cents to US$49.76 per barrel and the September natural gas contract was up seven cents to US$2.95 per mmBTU.

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