Gold News

Gold Prices Jump as Russia Vows to Stay in Ukraine, Stockmarkets Slump, China's Trading Volume Hits 3-Month High

GOLD PRICES jumped Monday morning as traders got their first chance to respond to the weekend's events in Ukraine and China.
 
Surging to $1350 per ounce by the start of London trade, gold prices then eased $5 lower as European stock markets fell hard.
 
The EuroStoxx 50 dropped 2.7% by lunchtime, while Ukraine's neighbors Poland and Hungary saw their stock markets lose 4.7% and 5.5% respectively.
 
Slovakia's Bratislava stock exchange didn't open for business.
 
"We expect safe haven demand to wane," says a 2014 gold prices outlook from ABN Amro, "because of an overall improvement in investor climate and continued low inflation."
 
"The gold advance is running out of steam," said Bank of America Merrill Lynch in a note late last week, forecasting "a top and bearish turn in trend" around $1351.
 
"The weekly chart looks bullish," counters the latest technical analysis from London market maker ScotiaMoccata's New York desk.
 
With Russia's foreign minister vowing Monday morning that his troops will remain in the Ukraine's Crimea region, defending against "ultra-nationalist threats" despite Western demands to quit, Moscow's top 50 blue-chip stocks dropped 11% this morning, and the Russian Rouble fell to new all-time lows against both the Dollar and Euro.
 
Reuters reported rumors that Moscow today spent $10 billion trying to buoy its currency.
 
As news reports said Russian troops also continued to operate at Ukraine's eastern border, Chicago wheat contracts rose 5.2%, and copper hit a 3-month low.
 
Major Western government bond prices rose further, pushing 10-year US Treasury yields down to 3-month lows at 2.60%.
 
Silver more than doubled the spike in gold prices, adding 2.8% at the top to touch a 3-day high of $21.70 per ounce before dropping just as quickly to $21.45.
 
Meantime on the Shanghai Gold Exchange, and after the weekend's terrorist knife attack in Kunming, south-west China, trading volume in the most active gold contract today jumped to CNY 12.1 billion, its highest level since 21st November.
 
But prices on the Shanghai Gold Exchange again fell to a discount to London settlement, repeating the pattern of last week as the Yuan fell to new 3-month lows on the currency market.
 
"It is not only ETF investors who have rediscovered the merits of gold in recent weeks," says a note from Germany's Commerzbank, referring to the halt in sales of gold from exchange-traded trust funds which totaled 880 tonnes last year, equal to almost one-third of world mine supply.
 
"Speculative financial investors are also betting more on rising gold prices again" through US futures, says Commerzbank, noting how latest regulatory data show "net long positions expanded by 40% [last week] to a 13-month high."
 
But calling speculative positioning "frothy" and "over-extended", Swiss investment and bullion bank UBS warns that "the substantial increase in a relatively short span of time raises the potential for a short-term washout once geo-political risks dampen."
 
UBS also notes, however, that the rise in speculators' net long positioning came "mostly on short covering", with hedge funds and other speculative players cutting their bearish bets by 26% and growing their bullish bets by only 1.6% from the week before.

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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