Investing.com - Gold prices dipped slightly in Asia on Monday after a weekend in which New Zealand and germany went to polls to both produce results that pointed to lengthy talks to form coalition government and North Korea and the U.S. ramped up a war of words and actionss.
Gold futures for December delivery eased 0.07% to $1,2962.60 a troy ounce on the Comex division of the New York Mercantile Exchange.
The far-right AfD party won a surprisingly large percentage of the overall vote in Germany, finishing third and entering parliament for the first time, with 13.5% of the vote. Under Germany's mixed-member proportional voting system, that vaults in well beyond the 5% threshold needed for seats in parliament.
Chancellor Angela Merkel's CDU and Bavarian allies, the Christian Social Union (CSU), won 32.5% of the vote, making them by far the largest parliamentary group, according to an exit poll for the broadcaster ARD, but that is down from 41.5% in the last election in 2013 and lower than recent polling. Their closest rivals, the center-left Social Democrats (SPD), slumped to 20.0%, a new post-war low.
Merkel now needs to work to form a coalition reportedly without the SPD, a process that will likely involve protracted negotiations.
In New Zealand, Bill English's National Party and the Labour party will vie for the support of kingmaker Winston Peters and his New Zealand First Party.
Elsewhere, a 3.4 magnitude earthquake in North Korea raised speculation of a uew nuclear test, but monitoring agencies were split on whether it was a natural event or a nuclear detonation.
Ahead this week, fresh comments from Federal Reserve Chair Janet Yellen are due as expectations start to grow for a December rate hike. Investors will be focusing on a pair of speeches from ECB President Mario Draghi as well as remarks from the heads of central banks in the UK, Canada and Japan.
Last week, gold prices pushed higher on Friday, pulling away from the previous session’s four-week low as risk aversion escalated and the U.S. dollar fell amid heightened tensions on the Korean peninsula.
The precious metal was boosted after North Korea said on Friday it could test a hydrogen bomb over the Pacific Ocean after U.S. President Donald Trump threatened to “totally destroy” the country if the U.S. was forced to defend itself or its allies.
The remarks added to concerns that the escalating rhetoric could lead to one side misinterpreting the other, with dangerous consequences. Many investors favor gold during times of geopolitical uncertainty.
Even with Friday’s gains, gold futures ended the week down 2.09% after the Federal Reserve’s policy statement on Wednesday indicated that it is still on track to raise interest rates in December.
Gold is highly sensitive to rising rates, which lift the opportunity cost of holding non-yielding assets such as bullion, while boosting the dollar, in which it is priced.
Rating agency Standard & Poor’s downgraded China on Thursday, saying that “a prolonged period of strong credit growth has increased China’s economic and financial risks.”