Gold price hits two-month peak on North Korea war of words

London: Gold hit the highest levels in two months on Thursday as the United States and North Korea exchanged more threats, prompting investors to buy bullion as a safe haven asset.

North Korea on Thursday outlined detailed plans for a missile strike near the Pacific territory of Guam, keeping up a war of words with US President Donald Trump after he said Pyongyang would face "fire and fury" if it continued to threaten the United States.

"For now, the uptrend is very much intact in gold, reacting to external geopolitical events," said Jonathan Butler, commodities analyst at Mitsubishi in London.

Spot gold was up 0.3 percent at USD 1,280.64 per ounce by 1225 GMT, after hitting USD 1,281.92 an ounce, its highest since June 8. Gold climbed 1.3 percent in the previous session, its biggest gain since mid-May.

US gold futures for December delivery rose 0.6 percent to USD 1,287.30 per ounce.

The USD 1,279 area is a key technical level, representing a downtrend that has been in force since mid-2016 when gold surged to a two-year peak of USD 1,374.91.

"If we break above this downtrend, then we potentially open up the region up to USD 1,300, the recent highs we saw in April and June," Butler said.

World stocks fell for a third day on Thursday and investors shifted assets into safe haven currencies the Swiss franc and yen as well as gold.

Speculative positions in US gold futures remain subdued, said UBS strategist Joni Teves.

"Subdued participation this year and lean positioning suggests that market participants would have to play catch-up on a break higher," she said in a note.

Physical gold demand, however, was sluggish in India while the rally in global prices dampened buying elsewhere in Asia and holdings of the largest gold-backed exchange-traded-fund (ETF), was unchanged on Wednesday.

"At least in this segment, investors apparently remain reluctant to seek gold`s safe haven. The gold market shows various signs of ambivalence and we believe that this pattern will continue into the foreseeable future," Norbert Rücker, head of macro & commodity research at Julius Baer, said in a note.

The market was also waiting for US inflation data on Friday that would offer clues about the extent to which the strengthening US labour market is spilling into inflation.

In other precious metals, silver rose 1.4 percent to USD 17.14 an ounce after hitting USD 17.17, its highest since June 14.

Platinum gained 0.3 percent to USD 974.45 per ounce. In the previous session, it hit a high since April 21 at USD 980.60.

Palladium climbed 1.3 percent to USD 902.20 per ounce.