Gold News

Demand to Buy Gold "Missing" as Ukraine Violence Grows, US Adds Sanctions

BUY GOLD bids took prices as high as $1306 per ounce for the 1st time in 6 sessions Monday morning in Asia, but the rise faded in London as world stock markets rose – and the US Dollar fell – despite fresh tensions and violence near Russian's border with Ukraine.
 
Kiev media reported an attack on a minibus, while the separatist mayor of eastern Ukraine town Kharkiv was today in a critical condition after being shot, apparently by sniper fire.
 
The US today imposed financial sanctions on 7 Russian officials and 17 companies, saying it wants to pressure Moscow into implementing the "de-escalation" plan for Ukraine agreed in Geneva this month.
 
"The ongoing geopolitical tensions in Ukraine are still lending support" to bullion prices, reckons German bank Commerzbank, saying that speculators are choosing to buy gold.
 
Latest data, however, show hedge funds and other speculators cutting their bullish position on US gold futures to a 10-week low.
 
Exchange-traded gold funds – which buy gold to back the value of shareholders' stake in a trust – last week "recorded only marginal outflows," says the German bank.
 
"Gold must command some respect," says Swiss investment and London bullion bank UBS, "that it successfully overcame its threats and closed the week higher" – most notably that physical demand to buy gold "remains poor".
 
Despite claims of "safe haven" bids cited by some news reports of the Ukraine tensions, "strong physical demand has failed to emerge at the current 2.5-month low in prices," says US investment bank Morgan Stanley.
 
"No real signs of any physical demand," agrees London brokerage Marex in a trading note.
 
Over in China, the world's No.1 consumer market for buying gold, wholesale prices rose 0.9% on Monday even as the Yuan rallied from 18-month lows to the US Dollar.
 
Compared against benchmark prices worldwide, however, Shanghai's most active gold contract held at a discount of 87¢ per ounce – entering an unprecedented 10th week of trading below London quotes to buy.
 
"For the moment," says German refining group Heraeus from its HQ in Hanau, "it appears that China is more than well supplied."
 
Net imports of gold bullion to China through Hong Kong fell 25% from February's near-record level, new data said Monday.
 
Reported by Hong Kong officials at 85 tonnes, however, net inflows were only slightly below the monthly average of 2013 – a record year for Chinese demand to buy gold.
 
Looking ahead, this week's US Fed meeting on Wednesday, plus Non-Farm Payrolls data on Friday, "should lead to a fairly volatile gold market," says Mitsubishi analyst Jonathan Butler in London.
 
"On the whole, gold is likely to lose out in the light of an expected further tightening of US monetary stimulus," he believes. But continued tensions between the West and Russia over Ukraine "could lend some further support."

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum 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 he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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