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Gold Price Erases Last Week's 3% Gain as Russia Seizes Ukraine's Naval HQ in Crimea, Shanghai Discount Holds at $7 Per Ounce

GOLD PRICE gains of 3.2% from last week were finally erased Wednesday lunchtime in London, with spot bullion falling to $1344 per ounce even as Russian troops stormed Ukraine's naval HQ in Crimea.
 
Ahead of today's US Federal Reserve vote – expected to leave interest rates at zero but taper QE to $55 billion for next month – silver fell to $20.64 for the third time in just over a week, nearing its lowest level in a month.
 
World stock markets held flat, but US futures pointed higher.
 
"As long as the situation in Ukraine remains unresolved," Bloomberg quotes Hong Kong trader and refiner Wing Fung Financial's head of research, Mark To, "this should keep gold prices supported."
 
"It was the fear of war that sent gold prices higher in the first place," claimed eponymous newsletter author Dennis Gartman to CNBC on Tuesday.
 
"Any incursion by the Russians into mainland Ukraine, while unlikely, but remotely possible, would send gold soaring."
 
"Any further intensification of tensions," said Bank of England members at their policy vote 2 weeks ago, "might cause a material increase in the international prices of grain and energy supplies."
 
Crude oil has since lost almost 3% against the US Dollar.
 
Rather than pursuing "weak" economic or political sanctions against Russia, reckons energy consultant Philip Verleger in the Financial Times, the United States could drop world oil prices by $10-12 per barrel over the next 2 years by releasing less than 1% of additional global supply from its strategic petroleum reserves.
 
Chinese gold prices meantime edged lower Wednesday, but the discount to London gold was cut as the Yuan also fell on the currency markets.
 
Barring last summer's spike lower, the Yuan stood today at its lowest Dollar value since spring 2013, down some 2.5% from this New Year's highs.
 
Trading at a premium to wholesale London gold bullion for all but 1 week over the last two years, Shanghai gold closed today some $7 per ounce below international prices, versus a discount of more than $8 on Tuesday.
 
"Gold's breakout seems to have faded," says US brokerage INTL FCStone, noting that prices have retreated below the October 2013 highs of $1362 per ounce.
 
"The gold price is continuing to correct," reckons Commerzbank's commodity team, pointing to "low inflation and positive economic data" from the US, as well as what it calls "the provisional pricing out of the Crimean crisis and the resulting higher risk appetite among market players."

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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