Gold News

Gold Prices Hit 3-Week High, Analysts Cite Ukraine "Safe Haven" Appeal and Asian "Bargain-Hunting" Despite Falling Demand Data

GOLD PRICES touched 3-week highs for Dollar investors overnight Monday, coming within 15¢ of $1330 per ounce as Ukraine's interim president Turchynov said Kiev was preparing an "anti-terrorist operation" against pro-Russian separatists who have seized regional government buildings in several eastern towns and cities.
 
The UK ambassador to the United Nations claimed Saturday that Russia has moved between 35,000 and 40,000 troops to its eastern border, "equipped with combat aircraft, tanks, artillery and logistical support units."
 
Easing back and then bouncing higher from $1320 per ounce – just beneath  April 2013's gold crash low, hit 12 months ago tomorrow in the metal's worst drop in three decades – gold prices rallied faster for UK and Euro investors as the Dollar extended its rise on the currency markets.
 
"Globex gold opened up strongly this morning," says a note from Swiss refinery and finance group MKS's Asian team, referring to the 23-hours-a-day Comex futures platform, "as investors clamoured to initiate safe-haven longs."
 
"Tensions between Russia and the West over Ukraine [are] giving support to gold," reckons Dutch bank ABN Amro's analyst Georgette Boele, quoted by Reuters.
 
"The unsettled geopolitical situation in Ukraine is...providing an element of support for gold," agrees US brokerage INTL FCStone's Edward Meir, quoted by Bloomberg.
 
Last week, however, the giant SPDR Gold Trust last week shed 0.5% of the gold bullion needed to back its shares, taking the total to a 5-week low of 804 tonnes
 
More than 2% below the peak of late March, that level was a three-year low when first reached in December.
 
Hedge funds and other leveraged speculators meantime cut their net bullishness on gold prices by almost 5%, weekly data from US regulators showed Friday.
 
Over the week-ending last Tuesday, the so-called "net spec long" position of bullish minus bearish nets held by all non-industry traders in Comex futures and options fell below 418 tonnes equivalent – its lowest level since mid-February.
 
Trying to explain the rise of gold prices, "part of the increase," says the Frankfurt-based commodities team at Commerzbank, "could be attributable" to speculators growing their bets after last Wednesday's release of meeting notes from the US Federal Reserve.
 
Those notes showed much less desire amongst Fed members for interest-rate hikes than previous comments suggested.
 
"China and India could also have contributed to the price hike," Commerzbank adds, citing "speculation" of stronger Indian imports in March and saying that sub-$1300 gold prices were "obviously regarded as attractive."
 
But "physical demand remain[s] cautious," says the latest note from refining group Heraeus's HQ in Hanau, Germany, "and there are no signs of this improving.
 
"Data from China points towards unchanged, if not lower demand."
 
Gold bullion prices in Shanghai closed Monday at a 3-week high in the Yuan, but continued to trade at a rare discount to the world's reference rate of London settlement.
 
Now trading at a discount rather than premium for 7 weeks running, Shanghai's most active gold contracts ended Monday $2.50 per ounce below London spot quotes.

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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