Data from the U.S. Commodity Futures Trading Commission released last week showed that currency speculators still held a large net short position in the yen during the week ended August 1, although somewhat smaller than the levels seen a couple of weeks earlier, when their bearish bets against the yen grew to the largest since January 2014.
In the latest economic data, the consumer-price index (http://www.marketwatch.com/story/us-consumer-inflation-remains-soft-in-july-cpi-shows-2017-08-11) rose a seasonally adjusted 0.1% in July, its fifth straight month of softness, raising more questions about whether inflation will eventually rise to hit the Federal Reserve's 2% annual rate target.
"Much of the rally (in gold) is because of the increased safe-haven demand", said OCBC Bank analyst Barnabas Gan. The Russell 2000 index of smaller-company stocks picked up 1.69 points, or 0.1 percent, to 1,374.23.
The Dow slid as declines in Apple and Goldman Sachs, down 2.3% and 1.7% respectively, outweighed gains in McDonald's and Coca-Cola, up 1.4% and 0.5% respectively.
"We're not very oversold yet so the market still has more downside left to it", said Robert Pavlik, chief market strategist at Boston Private Wealth in NY.
He has now gone further, saying the warning may not have been tough enough and that if North Korea did what it had threatened, it faced "an event the likes of which nobody's seen before".
Possibly due to the lack of appetite for risk in the market, the euro suffered on Thursday, down slightly against the dollar by 0.09% at 1.1749, slipping towards a two week low.
The S&P 500 dropped 1.4% to 2438.21, while the Dow Jones Industrial Average fell 204.69 points, or 0.9%, to 21,844.01.
North Korea responded with threats to launch missiles into the Pacific Ocean near Guam, a US territory. The stock has more than doubled over the past 12 months, gaining more than 160%.
"If the USA and South Korea carry out strikes and try to overthrow the North Korean regime and change the political pattern of the Korean Peninsula, China will prevent them from doing so", the editorial's authors said.
Seagate Technology gained 2.3 percent after investor ValueAct disclosed that it had acquired a 7.2 percent stake in the digital storage company.
Subdued U.S. inflation has stirred doubts about the chances of another Fed interest rate hike this year, which have weighed on the dollar. On Friday, fellow retailer J.C. Penney dropped 16% after its second-quarter loss exceeded expectations.
Benchmark 10-year notes US10YT=RR were last up 12/32 in price to yield 2.201 percent, from 2.242 percent late on Wednesday.
USA crude rose 0.41 per cent to US$48.79 per barrel and Brent was last at US$52.01, up 0.21 per cent.
Looking at currency movements during the Asian session, the yen continued strengthening against the dollar, with the pair trading below the 110 level at 109.96 ahead of European trading.
Gold added $3.90 to settle at $1,294 an ounce. The September copper contract was down two cents to US$2.91 a pound.
US crude rose 0.43 percent to $48.80 per barrel and Brent was last at $52.01, up 0.21 percent on the day.
The euro held steady at $1.1776. While the German DAX Index closed just below the unchanged line, the UK's FTSE 100 Index and the French CAC 40 Index both tumbled by 1.1%. Australia's S&P/ASX 200 dropped 1.2 percent. Japanese markets were closed for a holiday.
The benchmark USA yield on Thursday was just above 2.2 percent, at its lowest level since late June, as investors bought up Treasuries, a classic safe harbor.