Gold jumped to its highest since November on Tuesday as investors bought bullion as insurance against falling prices of other assets after North Korea tested a missile over Japan.
"Funds and traders are filling their boots with gold at the moment and so far that`s justified," said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.
"No matter where you look you can`t point your finger at anything that`s gold negative. Stocks are coming off hard, the dollar has weakened and now also against the yen, which has been the missing link, while bond yields are also taking a beating."
Spot gold, which rose for a third straight session, was up 0.9 percent at $1,321.04 an ounce by 0940 GMT after touching $1,325.94, its highest since Nov. 9.
U.S. gold futures for December delivery rose 0.9 percent to $1,327.
Spot gold had climbed by 1.4 percent on Monday, breaking through key resistance and marking its biggest one-day percentage rise since mid-May after comments by the head of the European Central Bank boosted the euro and hit the dollar.
Gains were then extended after North Korea fired a ballistic missile over Japan`s northern Hokkaido island into the sea early on Tuesday in a sharp escalation of tensions on the Korean peninsula.
"North Korea`s missiles over the Japanese Hokkaido islands obviously fuelled buying for the flight to safety," said Yuichi Ikemizu, Tokyo branch manager at ICBC Standard Bank.
European stocks fell more than 1 percent to a six-month low, also weighed down by the strengthening euro. [MKTS/GLOB]
Geopolitical risks can boost demand for safe-haven assets such as gold, which is considered a good store of value during volatility in other markets.
The next targets for gold are $1,337 an ounce, based on the November high after the U.S. election, and around $1,375, last year`s peak after Britain`s vote to leave the European Union, Hansen said.
Holdings of SPDR Gold Trust, the world`s largest gold-backed exchange-traded fund, rose 1.1 percent to 814.36 tonnes on Monday.
Among other precious metals, silver rose 0.4 percent to $17.48 after touching $17.63, its highest since June 8.
Platinum gained 0.9 percent to $995.50 after marking its highest since March 2 at $1,000,40.
Palladium was up 0.9 percent at $941.75, having hit a more than 16-year high of $948.50.