Gold Prices Spike After Crimea Vote, Retreat 1% from 6-Month High as EU Imposes Sanctions on Russia
Monday, 3/17/2014 14:30
GOLD PRICES retreated 1.1% from a new 6-month high in late Asian and London morning trade Monday, holding around $1378 per ounce as the European Union imposed sanctions against Russia over the weekend's vote in Crimea to leave Ukraine.
At least 75% of the 1.5 million people invited to vote did so on Sunday, local officials said, with 95.5% of those voting to join Russia.
The EU has yet to name the 21 Russian and Ukrainian nationals targeted by its travel bans and asset freezes.
European stock markets rose, as did the Russian Rouble.
US Treasury bond prices slipped, nudging 10-year interest rates up to 2.67%.
Crimea's vote "is keeping gold's safe haven bid intact," reckons Joni Teves, precious metals analyst at Swiss bank UBS, "as tensions with the West continue.
"Gold's direction from here will depend on how the situation plays out over the coming days and weeks."
Gold prices have now risen 4.2% in the 3 weeks since Ukraine's elected president Yanukovych fled Kiev on Sunday 22 February.
In the 7 weeks prior to that, gold prices rose 10.1% based on London Fix prices.
"The FOMC Statement will be the main US highlight this week," says RBC Capital Markets, pointing to Wednesday's decision from the Federal Reserve – widely expected to see another $10 billion tapering of the central bank's monthly QE money creation scheme.
"Recently [the
gold futures market] added open interest, volume and better moving averages," says George Gero at RBC. "So funds may be reluctant to pare positions now."
Speculators betting on higher gold prices through US Comex futures and options last week raised their net long position to the highest level in 13 months, according to data from US regulator the CFTC.
Equal to 491 tonnes of metal at last Tuesday's close, the
spec net long in mid-2013 hit 14-year lows below 100 tonnes equivalent.
"From these levels," says Jonathan Butler at Japanese conglomerate Mitsubishi, "gold prices could retrace all the way up to the late August 2013 high of $1434."
But "beyond the near term," counters London market-making bank Barclays, "we do not expect this safe-haven bid to linger.
"Gold prices will likely move lower as a result," says the note, "especially if USD-supportiveness emerges" from economic data.
The US Dollar today fell 1.5 cents to the Euro from Friday's 1-week highs, despite new data showing marked growth in US industrial output last month.
The Dollar had earlier pushed the Chinese Yuan down to its lowest level since spring 2013 at CNY 6.17, after Beijing doubled the currency's permitted range for daily trading.
Prices on the Shanghai Gold Exchange, which invariably trade at a premium to London settlement, extended their discount to more than $8 per ounce as the Yuan fell.
"The SGE has been in heavy discount in recent days," notes Swiss refining and finance group MKS's Asian desk, "but surprisingly has had little impact over spot gold prices."
With this month's bond default by a solar panel company
putting China's silver demand in question, "The doubling of the Yuan trading band," says Reuters, "points to much greater downside risk in a currency that many investors have treated as a one-way appreciation bet for years."
Silver prices spiked less aggressively than gold Monday morning, but fell harder to bounce off $21.20 per ounce – the same level silver was trading at in mid-February.
Email us