December gold finished up $10.80, or 0.8%, at $1,290.10 an ounce, marking the highest level for a most-active contract since June 7, when the metal finished at $1,293.20 an ounce, FactSet data showed.
Still, the S&P 500 is on track to post its biggest weekly loss in about nine months.
The CBOE Volatility Index, the most widely followed barometer of expected near-term stock market volatility, ended at a session low of 11.11 after rising as high as 12.63.
The Nasdaq Composite Index climbed 39.68 points, or 0.6%, to close at 6,256.56.
Looking to commodities, oil prices eked out gains in early trade, however sentiment was capped as concerns linger over OPEC's ability to rein in supply. According to CNN, a US jet departing from Guam flew over the Korean peninsula on Monday as a warning.
After a dip of as much as 0.52 percent earlier in the day, Wall Street's three major indexes bounced off intraday lows.
Shortly after Trump made his remarks, North Korea said it was "carefully examining" the idea of a missile strike on Guam, a U.S. Pacific territory.
In Europe, Germany's DAX fell 1.1 percent, while France's CAC 40 slid 1.4 percent.
In a note to investors, Paul Christopher, head global market strategist, and Tracie McMillion, head of global asset allocation, suggest, "the threat of a nuclear weapon is certainly more serious than previous threats, but that threat also may increase the probability of a diplomatic solution".
Manuel Oliveri of Credit Agricole said about the single currency,"The euro has become more correlated to risk in recent weeks and sentiment is still a bit cautious", adding "though the euro upside trend is likely to remain intact over the longer term". Netflix also fell, giving up $3.19, or 1.8 percent, to $175.17. Its shares slid $9.77, or 5.3 percent, to $174.02.
The 30-year bond was last up 4/32 in price to yield 2.7871 per cent, from 2.794 per cent late on Thursday.
Markets had seen a tentative recovery in risk appetite in USA and early Asian trading, but as the war of words resumed Asian stocks dropped back and London, Frankfurt and Paris all lost 0.5-1.2 per cent.
CURRENCIES: The dollar slipped to 109.48 yen from 109.85 late Wednesday.
In currency markets, the South Korean won was among the worst hit, falling 0.9% to 1,135.18 against the dollar as its Northern neighbour's tough talking intensified. Lockheed Martin, Raytheon, General Dynamics and Northrop Grumman all rose and the Dow Jones U.S. defense index was up 1.6 percent after hitting a record high.
The dollar was up 0.05 percent to 109.25 yen, after earlier falling to a sixteen-week low following data showing USA consumer prices rose less than expected in July.