Gold hit a near two-month peak on Wednesday, after North Korea said it is considering an attack on the U.S. Pacific territory of Guam and U.S. president Donald Trump boasted of the strength of the American nuclear arsenal.
The tensions rattled through global markets, sending investors out of equities and into the safety of the yen, Swiss franc, and government debt. The VIX "fear gauge" of expected volatility on the S&P 500 hit a one-month high .
"The market hates uncertainty and that's certainly what we have now," said Ole Hansen, head of commodity strategy at Saxo Bank.
"But looking ahead unless we start to see a conflict breakout or a major stock market correction, (gold) is capped at 1,295 (although) the upside at moment is the favored direction."
Spot gold rose 1.31 percent to $1,276.80 per ounce, while U.S. gold futures for December delivery rose settled up at $1279.30 per ounce. Gold futures had its best daily performance since May 17, when it gained 1.8 percent.