Gold News

Investors "Shift Sentiment" to Buy Gold But "Profit-Taking" Surprises Analysts as Ukraine-Russia Tensions Rise

BUY GOLD bids rose $10 per ounce from yesterday's sudden drop on Thursday in London, recovering $1332 as Western stock markets cut earlier losses.
 
Russian Roubles meantime hit 5-year lows vs. the Dollar, and Ukraine's Hryvnia fell almost 10%, as Moscow put jet fighters at the border on high alert, and an armed group of protestors raised the Russian flag over the regional parliament building in Crimea.
 
"Fears that Ukraine may suffer a sovereign debt default following months of political upheaval," the  Wall Street Journal reckons, "have  lent gold prices support in recent weeks."
 
By lunchtime in London on Thursday, gold was heading for a 5.7% gain in February. Silver stood 11.0% higher despite slipping to 2-week lows near $21 per ounce overnight.
 
"In our view," counters new research from investment bank Morgan Stanley, "[the] four broad themes explain[ing] recent strength" were the weakness in US economic data, strong Asian demand to buy gold, a better technical picture after the breakout above gold's 100-day  moving average, and a change to managed-money positioning in gold futures contracts.
 
"With gold holdings in [Western exchange-traded trusts] virtually unchanged this week," adds Bernard Dahdah, precious metals analyst at French bank and bullion dealer Natixis, "February could be the first month of net inflows since December 2012," with ETFs seeing investors buy gold exposure after shedding almost one-third of those positions in 2013.
 
This demonstrates "a clear shift in investor sentiment," Natixis says.
 
With a month to go until end-March, "We have increased our end Q1 target for gold to US$1280 from $1150," says Australia's ANZ Bank in a note.
 
China's central bank was today seen draining funds from the money market as Shanghai's interbank lending rates retreated to 8-month lows.
 
Heavy gold trading in Shanghai saw the most active contract end Thursday 30 cents below London prices to buy.
 
Wednesday's 1.7% drop in gold prices "was doubtless profit-taking" reckons the commodity team at Germany's Commerzbank "following gold's sharp rise in the weeks before." 
 
The $20 move was "surprising to most" says David Govett at London brokerage Marex Spectron, because of the "increasing tension between Ukraine and Russia.
 
"Gold has form for this as of late," Govett says of the apparent lack of safe-haven demand to buy gold, adding that the US Dollar is "the preferred haven when things start to heat up."
 
The US Dollar today knocked the Euro down to 2-week lows beneath $1.3650 after new data showed Eurozone bank lending shrinking faster than forecast in the 12 months to January.

Adrian Ash is director of research at BullionVault, the physical gold and silver market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and is now a regular contributor to many leading analysis sites including Forbes and a regular guest on BBC national and international radio and television news. Adrian's views on the gold market have been sought by the Financial Times and Economist magazine in London; CNBC, Bloomberg and TheStreet.com in New York; Germany's Der Stern; Italy's Il Sole 24 Ore, and many other respected finance publications.

See the full archive of Adrian Ash articles on GoldNews.

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