Gold edges up, hovers near 1-year high on haven demand

Gold edges up, hovers near 1-year high on haven demand”

The broader dollar index was down 0.3 percent at 92.56 and not far away from a 2-1/2-year low below 92 last week.

A potential standoff over the USA federal debt ceiling has raised alarm bells among investors who fear a repeat of 2011 when a prolonged showdown over increasing the borrowing limit and subsequent downgrade of US credit quality led to slump in the S&P 500 stock index.

Bank stocks led the slide as bond yields slumped. "In that case, it would be prudent to raise the federal funds rate more gradually". In a statement, the European Central Bank said it could extend its stimulus in terms of its size or duration if the outlook less favorable.

The dollar was subdued on Thursday and the euro stood firm ahead of the European Central Bank meeting where President Mario Draghi is expected to start laying the groundwork to withdraw monetary stimulus. The rise in the currency's exchange rate is complicating life for the central bank.

The latest flare-up sent investors fleeing for safe assets, with the yen climbing to 109.50 to the dollar and gold up 0.9 per cent, pushing towards US$1,340 and levels not seen since November. Ahead of his briefing, the euro was up 0.5 percent at $1.1970.

"The market is likely to continue focusing on geopolitical tensions, but it will start to shift focus to the Federal Reserve meeting in September, looking for details on reducing the balance sheet", Samson Li, an analyst with Thomson Reuters-owned metals consultancy GFMS said.

But a majority of analysts project appetite for safe-haven assets to wane in a while.

Losses in gold, however, remained limited as expectations on additional US rate increases faded, following comments from Federal Reserve officials urging the USA central bank to consider shelving its plan to hike rates later this year amid a slowdown in inflation. The unexpected departure of Fischer, a widely respected economist, adds to a leadership vacuum at the top of the Fed as it navigates a hard path.

Each U.S. index had been on a multiday upward trend.

"North Korea seems to be what gets the biggest reaction, at least over the last month or two", Aaron Jett, vice president for global equity research at Bel Air Investment Advisors in Los Angeles, told Reuters.

The Dow Jones industrial average tumbled 234.25 points, or 1.07 percent, to 21,753.31.

The Nasdaq Composite was up 10.73 points, or 0.17 percent, at 6,386.30. Energy companies climbed the most as the price of crude oil rose.

U.S. West Texas Intermediate (WTI) crude futures ticked up 0.2 per cent to trade at $47.38 per barrel as U.S. demand recovered after being hit by reduced refinery activity since Harvey made landfall on August 25.

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