Spot gold and silver gained about a half a percent Thursday as tensions ratcheted up between Ukraine and Russia. “The market is getting nervous about the Ukraine situation, and people are moving to gold,” said one commodities broker, adding that “Talks of further sanctions against Russia are increasing the safe-haven premium of gold.” And while noting that the “propaganda is flying hot and heavy from both sides” of the Ukraine border, Jesse’s Café Américain suggests that “A real flight to safety would crush the precious metal shorts if it spills over from paper to the bullion markets. And so I would look for the banks to do all that they can to avoid it, diffuse it, deflect that possibility.”
Archive for the ‘Russia’ Category
“The numerous sources of geopolitical crisis are evidently preventing the gold price from slumping,” said Commerzbank’s head of research, after spot gold edged up 0.1% on Wednesday and silver added a couple ticks more to gain 0.3%. Gold’s gain was also attributed to a drop in the dollar, but there’s more to come, according to the chief economist at Saxo Bank: “Our major call is: short the US dollar index and long commodities … USD will weaken significantly from mid-Q3 into Q1-2015. The market remains overexposed to the dollar and U.S. equities relative to the norm. Furthermore, with mid-term elections on November 4 the coming budget talks will have a hard time producing the convincing and long-term results needed.”
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At the end of a down week for gold and silver, off some 1.8% and .7% respectively, both were up slightly on Friday as Ukraine held sway, with 130 trucks from Russia’s long-stalled “aid” convoy rolling across the border into Ukraine, which characterized the breach as a “direct invasion.” Not so direct was Fed Chair Yellen, whose speech at Jackson Hole was seen as “noncommittal,” and even “confusing,” while an analyst quoted by Bloomberg saw misdirection: “They’re trying to bluff the market,” he said of the Fed. “They’re trying to warn investors about the potential for rate increases, without actually implementing a rate increase. I think that will strengthen the trading range for gold.”
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“Gold obviously didn’t like the U.S. CPI and housing data, which boosted the dollar,” said a Saxo Bank manager, speaking about a 0.1% increase in the monthly inflation rate, and July’s 15.7% jump in U.S. home construction. But despite that, spot gold was off only 0.2%, while spot silver took a 1% hit. And according to an analyst quoted by MarketWatch, gold will likely remain in a narrow trading range, “unless by some miracle, all the tensions in the world are sorted out. A doubtful scenario. I hasten to add that gold is not the perfect safe haven, far from it, but it does knee-jerk react to headlines, and as such, the downside should be limited for the time being.” But that said, gold is also not going through the roof during this period of global tensions, as evidenced by the above chart. Grant William’s looks at what’s behind “Gold’s sudden ignorance of geopolitical risk.”
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A rising dollar and an equity rally on the perception that Ukraine tensions had eased, were said to be the driving factors behind a 0.4% drop in spot gold on yet another mixed day for the metals that also saw silver add 0.3%. “The market decided that since shooting had not broken out in the Ukraine that all is well and it was time to bulk up on the risk trade, albeit with low volumes,” according to a post at Jesse’s Café Américain, which calls this “a very cynical, Fed-fueled market.”
And in looking at when gold and silver might break out of their narrow trading ranges, Tim Iacono concludes that “Uncertainty over developments in Ukraine and Iraq should produce enough safe haven demand to keep metal prices from falling far during the last two weeks in August, but it seems any substantive rally will have to wait until at least September.”
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Gold and silver were as erratic Friday as the day’s news reports about whether or not Ukraine artillery destroyed parts of a Russian column that did or didn’t cross into Ukraine. The metals fell early, and hard, in what was described as “a pretty obvious takedown,” occurring as initial inspections of the “humanitarian convoy” vehicles, which definitely did not cross the border, came up “almost empty,” according to a BBC correspondent.
Then, writes Dan Norcini, recapping the action in gold, “around mid-morning, up went the yellow metal, recapturing the $1300 level as reports filtered into the market that Russian forces had crossed the Ukrainian border and been engaged by their troops.” When all was said, but far from done, spot gold and silver ended off 0.7% and 1.4% respectively, with their near-term direction possibly hinging on the answer to this question.
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Silver was back in positive territory on Thursday and gold inched up again as U.S. jobless claims rose more than forecast, clocking in at a six-week high of 311,000. “Concerns about the labor market are back,” according to one broker quoted by Bloomberg, who added that “safe-haven bids continue to come in because of the geopolitical developments.” Those bids were likely tempered on Thursday by Russian President Putin toning down his rhetoric on Ukraine. But that was before reporters for the Guardian and the Telegraph wrote of spotting Russian armored personnel carriers and support vehicles crossing the border into Ukraine.
And concerning a report from the World Gold Council that Q2 demand for gold fell by 16% from 2013, USA Gold points out that “While not as strong as the seemingly insatiable demand seen in 2013, 964 tonnes is still a pretty darn good number; better than Q3 and Q4 of last year. As Jim Rickards noted in a recent interview, ‘[B]ig banks looted the GLD warehouse,’ of 500 tonnes in 2013. That’s a one-time event. ‘You can’t do that twice,’ said Rickards.”
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Silver futures finished off 0.3% on Wednesday, which is what gold ended up, with the impetus being July’s flat retail sales, described as “an appalling number” that “has faded the notion of a hike in the interest rate by the Fed, at least today.” And while U.S. data held sway over geopolitics, fighting resumed between Israel and Hamas, U.S. troops are on the ground in Iraq, and the Russian aid convoy headed to Ukraine has gone to ground at a Russian military base, some 300 miles from its Ukrainian destination of Luhansk. This as Ukraine’s Interior Minister declared that “No Putin ‘humanitarian convoy’ will be permitted to travel through the territory of Kharkiv region.”
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Silver futures lost about one percent on Tuesday but gold inched up as Ukraine again took center-stage over the question of access to the country by a Russian humanitarian convoy of almost 300 trucks. But that’s not all. According to one analyst quoted by Reuters: “Improving gold prices are due to escalations of Ukraine-Russia tensions and Iraq conflicts, but traders are also worried about Europe’s snail’s pace recovery.” An economic survey released Tuesday showed that German analyst and investor confidence plunged to an 18-month low. Also, Japan reported a 6.8% annualized drop in 2nd quarter GDP and a collapse in consumer spending.
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The value of an Indian businessman’s new gold shirt was virtually unchanged Monday, while silver, a more practical wearable, gained 0.8%. Gold’s flatness was attributed to “rising global equities, and an apparent easing of tensions over Ukraine and the Middle East,” with stock markets said to have “largely ignored news Russia would send an aid convoy to eastern Ukraine, a move Western officials have said could serve as a pretext for an invasion.”
But “world inserurity” is still seen as likely positive for gold, according to former Bank of England governor Mervyn King. And, as one analyst quoted by MarketWatch points out: “Interestingly, while the yen has unwound, other safe-haven assets such as gold haven’t seen much movement at all. Perhaps this highlights the degree of cautiousness investors are still exercising at the moment.”
Reuters reports that before ending off 0.3% on Friday, “gold rallied to a three-week high on news U.S. aircraft bombed Islamic fighters marching on Iraq’s Kurdish capital of Arbil. But safe-haven buying dried up after Russia’s Defense Ministry said it had finished military exercises near its border with Ukraine.” And after also losing a fraction on Friday, silver was down 1.8% for the week, while gold logged a 1.4% gain. But when it comes to 2014 bullion coin sales, silver’s thumping gold.
Dan Norcini: Ukraine events supporting gold, but for how long?
Silver futures finished off 0.2% on Thursday while gold futures added 0.3%, with Bloomberg attributing the gain to a decline in U.S. stocks on “concern that escalating tensions between Russia and Ukraine will hurt the global economy,” and quoting one analyst as saying that “Some money is flowing into gold from equities because of concerns about Europe.” Comex gold futures for December delivery settled at some $1,312 an ounce.
And Reuters adds Iraq to the mix: “Bullion climbed after the New York Times reported that U.S. President Barack Obama was considering air strikes and emergency relief airdrops to help 40,000 religious minorities in Iraq, who are trapped on a mountaintop after threats by Islamic militants.” Both the Times and McClatchy report, according to Kurdish and Iraqi sources, that airstrikes have begun, but the Pentagon denies that the U.S. carried out the strikes.
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