Source: Bloomberg

There is a strategic risk premium in the markets, and it’s worth about $25 in the price of gold. Gold has tracked the Japanese yen all year, until the past week, that is, when the gold price rose about $25 (or 2%) above the level indicated by the yen.

Korean stocks are about 12% below their July peak, but the Hang Shang China Enterprises Index is off only 1.5% from its peak, and up slightly this morning.

Global markets have responded to the latest Korean nuclear scare with an enormous yawn. Investors evidently view the crisis the same way that former US Defense Department official Steve Bryen does in a commentary on Asia Times’ main page this morning: the US military declines to see a threat to the United States in recent North Korean actions, and declines to say what the threat might be to America’s allies in the region.

In other words, the US will do nothing besides bluster, and China’s strategic position will gain at American expense.