Gold Resilient Amidst Troop Build-up on Ukrainian Border

GOLD PRICES recovered Wednesday morning after yesterday’s drop, while the Euro hit a 9-month low against the US dollar.

European stock markets ticked slightly lower and decreased for the fifth time in six days.

Brent crude oil rose to $104 again, a level it already reached at the beginning of the week.

Gold consolidated and was range-bound around $1290 per ounce on Wednesday morning, whereas silver traded at $19.83. The gold price in Euro stood at midday on its highest point in five sessions, trading shy of €970 per ounce.

Silver prices dipped below $20 per ounce yesterday for the first time in seven weeks. Other precious metals such as platinum and palladium also traded lower by more than 1 percent.

Gold prices in Shanghai closed at $1293.12 today. This level was already reached yesterday, after gold ticked up as Asian shares fell after Chinese economic data release. “The fact silver fell less than gold [the day before] which was the opposite to what happened in London yesterday, suggests industrial demand for silver in China is helping to cushion the price fall here,” reckons Will Adams at the Bullion Desk. 

Earlier on Tuesday, Gold prices declined after the release of the ISM Non-Manufacturing data for July, explains a Japanese analyst. At 58.7, the index, which measures the business conditions in the US non-manufacturing sector, was much better than the forecast 56.5 and the highest result since January 2008. A result above 50 is considered bullish for the USD.

Gold later recovered as President Putin’s order to respond to US and European “unacceptable” sanctions by reinforcing troops at Ukraine’s border raised concerns about a possible Russian invasion. “There’s a lot of equipment. This is the sort of thing one does to exert pressure or to invade,” told Polish Foreign Minister Radoslaw Sikorski to TVN24 BiS television.

“Gold prices rose on Tuesday [afternoon] as a tumble in US equities and worries about escalation of military action in eastern Ukraine helped bullion recover earlier losses driven by bullish US economic data,” agrees Thomson Reuters.

“The situation in the Ukraine bears some watching this week, as we could be in for something of an ‘August surprise’ if policymakers misread Presidents Putin’s intentions,” comments Edward Meir at INTL FCStone.

The single currency versus the Dollar meantime hit 1.3347, a level that was last touched in November 2013. Apart from the risk-awareness due to the rising tensions between the Ukraine and Russia, “weak German economic data deepened concerns about the currency bloc’s economic recovery,” says the Financial Times. German factory orders unexpectedly dropped in June compared to the previous month.

In the meantime, Italy reportedly fell back into recession. According to latest figures, Italy’s GDP contracted by 0.2% in the second quarter of the year.

By Steffen Grosshauser