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Gold Prices Slip with Stocks, Bonds & Commodities as Ukraine Tensions "Underpriced by Market"

GOLD PRICES slipped from near 3-week highs Tuesday morning, as news of fresh Ukraine violence and confrontation continued and world stock markets also edged back with both commodities and major government bond prices.
 
The US Dollar also fell, hitting its weakest level against the Euro since mid-March's 2.5-year low, plus a fresh 4.5-year low against the Pound after new PMI data showed a fresh surge in UK manufacturing activity.
 
With London returning to business after the long Bank Holiday weekend, wholesale gold bullion in UK Pounds fell below last week's finish at £770 per ounce.
 
The world's benchmark Dollar gold price dropped to $1306 after touching $1315 per ounce in thin trade on Monday.
 
Shanghai gold ended the day at a premium to London settlement of $1.30 per ounce, the third time in this May Day shortened week that it's bucked the previous two months' switch to a discount.
 
"Very light two-way flows above $1310 early in the session," says a note on gold prices from Swiss refiner and finance group MKS's Asian desk, adding that Monday's spike came as private investors trading Chinese gold contracts moved to close their bearish bets on news of fresh violence in Ukraine.
 
Swiss investment bank UBS's analysts remain "neutral" on the short-term outlook for gold and other precious metals, calling $1295 "near-term support".
 
Fellow London market-maker HSBC is "moderately positive" in contrast, warning that "it is possible the financial markets have undervalued the geopolitical risk associated with the situation in Ukraine.
 
"With bullion back over $1300 per ounce, gold appears well placed to trade higher, especially if geopolitical tensions in Eastern Europe, remain high. Volatility may also increase."
 
Gold price volatility put in its lowest monthly average in April since March 2013, just before last spring's crash saw gold prices drop at the fastest pace in 31 years.
 
"Many Chinese 'damas' or 'mother investors' flooded into the market to buy gold," reports the Want China Times, citing Beijing Evening News and using a term for Chinese housewives buying gold popularized by the Western media in 2013.
 
"But they have since suffered combined losses of about 4.6 billion yuan ($735m) as gold prices fell further...The market has not seen the [same] wave of frenzied buying this year."
 
Gold bullion imports into Thailand fell hard between January and March this year, new data showed Monday, dropping "sharply" compared with the first-half of 2013's record figure of $1.6 billion "when the economy was healthier and gold savings more robust," says the Bangkok Post.
 
Over in India, formerly the world's No.1 consumer nation until overtaken by China last year, "the attraction of gold as an asset is coming down," said the prime minister's chief economic advisor C.Rangarajan on Monday, because "inflation is showing signs of decline and gold prices are also not rising."
 
Lower gold demand – forced through official data by 2013's de facto ban on imports – means India's Current Account Deficit (CAD) with the rest of the world is likely to drop to 2% of GDP in the coming few years, Rangarajan says.
 
It would also mean "the restrictions that have been imposed administratively" – a key issue in the current elections until India's major parties' manifestos went silent on gold – "will be relaxed," Rangarajan believes.

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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