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Gold spikes after North Korea H-bomb test

Safe havens are in demand following North Korea's test of a hydrogen bomb, although FTSE 100 recovers from an early dip.

Gold spikes after North Korea H-bomb test

(Update) Gold jumped close to a 12-month high of $1,335.3 an ounce as investors turned to save havens following North Korea’s testing of a hydrogen bomb at the weekend.

The price of bullion gained 0.8% or $10.80 in response to the escalation in tension with US president warning ‘it is ready to annihilate’ North Korea for its latest provocation and would stop all trade with any country doing business with the country.

The test on Sunday was North Korea’s sixth and most powerful blast as it trialled what it said was an advanced hydrogen bomb for a long-range missile that could threaten the US and its neighbours.

Fiona Cincotta of City Index said North Korea's leader Kim Jong-un was showing extraordinary level of defiance to the US and a surprising willingness to anger China, its only backer.

'North Korea carried out the nuclear test on Sunday with full knowledge that it would enrage Beijing, with the timing threatening to overshadow the BRIC summit hosted by Chinese President Xi. Yet the rogue state paid little regard to this, which is concerning as it means there appears to be little preventing Kim Jong escalating the tension further,' she said.

Stock market reaction was relatively muted, however, as analysts pondered the limited options facing both the US and China.

Government bonds firmed with yields – which move in the opposite direction to prices – dipping to 1.044% on 10-year gilts.

Oil prices fell with Brent crude options dropping 1.1% to $52.17 a barrel.

After overnight falls in Asia and Japan the FTSE 100 opened 17 points lowere but recovered by mid-morning to trade just six points down at 7,432, helped by gains in miners and consumer stocks.

The mid-cap FTSE 250 fared worse, declining 85 points or 0.4% to 19,700.

Acacia Mining (ACAA) was the FTSE 250's biggest faller, down 10.5% to 185.6p, after announcing it would reduce activity at its Bulyanhulu gold and copper mine following Tanzania's ban on exports in March.

Russia-focused Highland Gold Mining (HGM) slipped 3.6% to 158.75p on a fall in half-year profits caused by the stronger rouble.

The FTSE Small Cap index was more robust, shedding under six points to 5,705. Allied Minds (ALML), the troubled intellectectual property rights group, was a highlight, bouncing back 5% or 6p to 121.5p from recent falls.



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