Capital Gold Group Report: Gold Prices Up as Investors Seek Safety against Escalating Tensions between North and South Korea

Alix Steel
12/20/10 – 09:42 AM EST

NEW YORK (TheStreet) — Gold prices were climbing higher Monday as the metal shined as a safe-haven asset.

Gold for February delivery was adding $6.30 to $1,385.50 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,388.90 and as low as $1,377.

The U.S. dollar index was up 0.02% to $80.38 while the euro slid 0.30% to $1.31 vs. the dollar. The spot gold price was rising more than $9, according to Kitco’s gold index.

Gold prices were shrugging off a stronger U.S. dollar as investors bought gold as protection against escalating tensions between North and South Korea.

South Korea went ahead with military exercises off the coast of Yeonpyeong, despite the fact that North Korea threatened retaliation, echoing its attack on the island in November which killed four people. South Korea had asked civilians to seek shelter as a precaution.

Investors were buying gold as protection against any potential conflict as a safe place to preserve their wealth. Gold was also benefiting from uncertainty in Europe. Although European Union leaders agreed to a permanent crisis-lending facility starting in 2013, there was no immediate aggressive action announced out of the EU summit last week.

Worries are escalating the Spain might be on the chopping block. The government might be in OK shape but the soaring debt of its banks and citizens might overwhelm the government and the debt market. The aggressive downgrade of Ireland by Moody’s Friday didn’t help matters as the ratings agency warned that Spain’s credit rating was also on review.

Moody’s spread even more Christmas cheer on Monday downgrading five Irish banks — Allied Irish Banks(AIB), Bank of Ireland, EBS Building Society, Irish Life & Permanent and Irish Nationwide Building Society — because of their reliance on government funding.

“Further pockets of profit-taking … are likely in the run-up to year-end but as has been seen this morning the mix of economic and geo-political woes will continue to underpin the complex,” says James Moore, research analyst at fastmarkets.com.

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