North Korea, officially known as the Democratic People’s Republic of Korea (DPRK), is a country located in East Asia, in the northern half of the Korean Peninsula. In 1910-1945, Korea was a Japanese colony. After the surrender of Japan at the end of World War II, Korea was divided into two zones: the south was controlled by the Americans, while the north was occupied by the Soviets. The reunification talks failed and two separate governments were created in 1948: the capitalist Republic of Korea in the South and the communist Democratic People’s Republic of Korea in the North. Soon, the Korean War broke out, as the North invaded the South. The Soviet Union supported North Korea, while the U.S. supported South Korea. The military conflict lasted from 1950 to 1953, when the ceasefire was negotiated. However, South Korea and North Korea are still officially at war – and the U.S. continuously keeps troops in South Korea.
North Korea and Gold
The lack of a peace treaty between North Korea and South Korea is disturbing for investors who worry about the possibility of a new military conflict between the South with its ally, the U.S., and the North. In particular, 2017 was a time of escalated tensions between North Korea and the U.S. There were two reasons for that: the rapid progress of North Korea’s nuclear program and Trump’s elevated rhetoric against North Korea. On August 8, the U.S. President promised thatwould meet North Korean threats. Some analysts and investors believed that the tensions between the countries would make gold prices soar.
However, historical analysis shows that incidents related to North Korea usually failed to ignite sustained. Surely, tensions around the Korean Peninsula were sometimes able to lift gold prices for a while, but the impact was usually temporary and limited. This finding is in line with the fact that are not able to trigger anything but a short-term and limited response in the . In other words, they may add some upward pressure to the underlying fundamental bullish trend, but they are usually unable to reverse . Hence, gold investors should look cautiously at North Korea which may be now a nuclear power able to threaten the U.S. with a hydrogen bomb, but they should not expect geopolitical factors, including tensions around the Korean Peninsula, to dominate the long-run fundamental drivers of the gold market, such as the or .
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