Gold Hits Two-Month High on North Korea Tensions

US stocks headed lower in early trading Wednesday, Aug. 9, 2017, as traders weighed the growing tensions between the USA and North Korea.

KOREA JITTERS: With President Donald Trump warning North Korea of "fire and fury", investors have become concerned that the war of words between Washington and Pyongyang could escalate.

Wall Street's so-called "fear gauge", the CBOE Volatility Index, eased after hitting its highest levels since Election Day on Friday (http://www.marketwatch.com/story/wall-streets-fear-gauge-on-course-for-biggest-weekly-surge-in-2-years-2017-08-11).

Gold hit its highest levels in two months on Thursday as the U.S. and North Korea exchanged more threats, prompting investors to buy bullion as a safe-haven asset. The dollar notched a two-month trough on the safe-haven Japanese yen and was last down 0.3 percent at 109.99.

"The war of words between the leaders of the USA and North Korea continues to dominate investor sentiment", said Forex.com technical analyst Fawad Razaqzada.

Despite the ongoing turmoil, investors' focus was slowly returning to the U.S. economy after Chicago Federal Reserve president Charles Evans said Wednesday it would be "reasonable" to announce the beginning of a reduction of the Fed's balance sheet next month. Japan's Nikkei 225 Index edged down by 0.1%, while Hong Kong's Hang Seng Index tumbled by 1.1%.

US stock indexes opened lower on Wednesday as investors turned risk averse.

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At 12:43 p.m. ET (1643 GMT), the Dow Jones Industrial Average was up 49.69 points, or 0.23 percent, at 21,893.7 and the S&P 500 was up 6.84 points, or 0.28 percent, at 2,445.05.

Shanghai posted its biggest one-day drop since December while Seoul stocks again ended deep in negative territory.

The dollar weakened after news that US producer prices unexpectedly fell in July, recording their biggest drop in almost a year and pointing to a further moderation in inflation that could delay a Federal Reserve interest rate increase.

Burger chain Wendy's was up 4.20 per cent after it reported better-than-expected quarterly profit and sales. Germany's DAX was flat, while France's CAC 40 fell 1.1 percent. The S&P 500 gained 3.11 points, or 0.1%, to end at 2,441.32, supported by gains in consumer-discretionary, technology and health-care sectors.

Commodity-related stocks are among the worst performers against the backdrop of heightened political uncertainty after Trump further ratcheted up the rhetoric. The S&P has lost more than 1 percent on only three days this year. The euro fell to $1.1728 from $1.1757. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, dipped by 2.3 basis points to 2.189 percent.

Macy's shares closed down 10.2 per cent and Kohl's fell nearly 6 per cent as the companies continued to report a drop in quarterly same-store sales, stoking concerns that their turnarounds may still be a long way off.

Bond prices were little changed.

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