Gold News

Gold Price Drops 3/4 of "Ukraine Crisis" Jump as Russia Moves to Ease Tensions

The GOLD PRICE fell hard Tuesday morning in London, losing three-quarters of Monday's 2.5% jump to 4-month highs above $1350 per ounce, as the Kremlin sought to ease tensions over Ukraine and world stock markets rallied.
 
First, at 6am London time, Moscow announced the end of military exercises suddenly called last week, and which were already scheduled to end late Monday.
 
Prices for large gold investment bars lost $10 per ounce inside 10 minutes.
 
President Putin then told his first press conference since the weekend crisis that sending Russian troops into the Ukraine would only be a "last resort".
 
The spot gold price fell again to $1332, a level first hit during this 2014 rebound last Monday.
 
"Financial market tension is melting away," says FX analyst Kit Juckes at Societe Generale, "[but] no, of course it's not 'all over'."
 
Ukraine's interim government in Kiev says 16,000 extra Russian troops have already crossed the border from Russia, adding to the 25,000 staff which Moscow is authorized to station in Sevastopol.
 
"The economic fallout," says Juckes, "notably in Russia, will be significant. But financial markets are short-sighted animals, and everything is calmer."
 
"Is it just me," asks Standard Bank FX strategist Steven Barrow, "or do major markets not respond to shock events with the same ferocity that they did in the past?"
 
Monday's 2% fall in European equity investment prices "hardly seems substantial in light of weekend events in the Ukraine," he adds. "Nor does the 2% rise in gold prices."
 
Tuesday morning saw most other financial markets reverse Monday's jumps, with gas and wheat prices falling with major-government bonds as stock markets bounced hard.
 
Gold trading volumes in US futures more than doubled yesterday from Friday, and gold options saw heavy demand for $1400 calls. 
 
The giant SPDR Gold Trust (GLD) however added no metal to the investment gold backing its shares.
 
Closing before Putin's comments on Russian troops and Ukraine, bullion traded in Shanghai this morning finished the day some $2.80 per ounce below the London gold price.
 
Typically trading at a premium, gold already shipped to China – the world's No.1 consumer nation – went to a discount last Monday for the first time since November.

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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