Gold Pops on North Korea Bomb Test

The major US indices limped higher on Friday before the Labor day long weekend but with further escalations in the North Korean tensions, local markets may ignore these leads. North Korea claims to have tested a hydrogen bomb which registered as a 6.3 magnitude earthquake according to the US geological survey. As a result, gold prices gapped up around US$10 higher on the open this morning while S&P500 stock futures are down 10 points.

Gasoline prices have retreated slightly as the worst of Hurricane Harvey is now past and the floodwaters recede. Refineries will begin coming back online and oil production in the Gulf of Mexico will ramp back up pre-hurricane levels. The oil inventory data out this week will reveal the extent of the hurricanes disruption to production and refining. While a drawdown in gasoline inventories is all but assured, whether or not crude will build or draw remains to be seen.

Palladium prices have been surging recently for a number of reasons. Most of the palladium in the world is mined in Russia which has been in a tit-for-tat escalation in imposing sanctions between them and the US in addition to sanctions imposed on Russia by several other nations. This increases uncertainty in global palladium supply which is required for catalytic converters in cars and also in semiconductors. The palladium price is currently at $992 per ounce, not far below its all-time high.  

This week is a busy week for Australian data releases. We will get the Reserve Bank of Australia's rate decision on Tuesday, where rates are expected to stay unchanged. On Wednesday, the Australian Bureau of Statistics will release Australia's second quarter GDP and on Thursday we get retail sales and trade balance data.         

Data Releases:

–   Australia Company Operating Profits 11:30am AEST

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This article was written by William O'Loughlin – Investment Analyst, Rivkin Securities Pty Ltd. Enquiries can be made via william.oloughlin@rivkin.com.au or by phoning +612 8302 3633.