/ 21 July 2014

Gold gains as unrest is weighed against US outlook

Analysts expect movement in gold to be closely impacted by how geopolitical developments unfold.
Analysts expect movement in gold to be closely impacted by how geopolitical developments unfold.

Gold gained in New York, after the first weekly loss in seven, as investors weighed tension in Ukraine and Gaza against the outlook for higher US interest rates. Palladium traded below a 13-year high.

Gold slipped 2% last week as the dollar climbed to a four-week high versus 10 major currencies and Federal Reserve Chair Janet Yellen said benchmark rates could increase sooner than expected. Bullion slid 28% last year on expectations the Fed will reduce monetary stimulus.

Unrest in Ukraine and the Middle East partly helped gold rebound 9.4% this year. Russian President Vladimir Putin is facing intensified international pressure after pro-Russian rebels were blamed for downing a passenger jet on July 17, killing 298 people on board. A ground offensive in Gaza entered its bloodiest phase yet after two weeks of fighting between Palestinian and Israeli soldiers.

“While economic conditions in the US continue to revive and physical demand from Asia continues to languish, we feel that geopolitical developments are the only possible factor that could support gold in the short term,” Abhishek Chinchalkar, an analyst at Mumbai-based AnandRathi Commodities, said in a report on Monday. “We expect movement in gold to be closely impacted by how geopolitical developments unfold.”

Gold for December delivery rose 0.4% to $1.315.70 an ounce by 7.29am on the Comex in New York. The decline last week ended the longest run of weekly gains since 2011. Bullion for immediate delivery added 0.2% to $1.313.70 in London, according to Bloomberg generic pricing.

Trading volume
Futures trading volume was 38% below the average for the past 100 days for this time of day, data compiled by Bloomberg show.

The US and European Union last week tightened sanctions against Russia over its annexation of Crimea and its role in backing rebels in Ukraine. Putin is facing increasing pressure to respond to claims that a Malaysia Airlines jet was downed using a missile supplied from the country.

Silver for September delivery rose 0.5% to $20.995 an ounce in New York. Platinum for October delivery added 0.3% to $1.494.90 an ounce. Palladium for September delivery increased 0.2% to $883.15 an ounce. It reached $890 on July 17, the highest since February 2001.

The metal advanced 23% this year as usage in cars rose and a mine strike cut output in South Africa, the second-largest producer. Russia is the largest supplier.

“Against the backdrop of supply disruptions in South Africa, which will continue over the medium-term, as well as the continuous increase in vehicle production in the Chinese and the US automobile industry, it is expected that palladium continues to gain momentum,” Heraeus Metals Germany said in a report emailed on Monday.– Bloomberg