Gold Climbs for Second Day as Ukraine Tension Spurs Haven Demand

Gold futures climbed for the second straight day as the standoff between Russia and Ukraine spurred demand for a haven.

Ukraine began military drills as Russian forces tightened their hold on the Crimean peninsula. On March 17, the European Union will discuss harsher penalties, barring “obvious changes in Russia’s actions,” German Foreign Minister Frank-Walter Steinmeier said today. This year, gold has climbed 12 percent amid signs of a faltering U.S. economy and turmoil in Eastern Europe.

“The Ukraine situation is lending support to gold,” Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago, said in a telephone interview. “The fear premium is back because of the developments.”

Gold futures for April delivery rose 0.4 percent to settle at $1,346.70 an ounce at 1:37 p.m. on the Comex in New York. Yesterday, the price gained 0.2 percent. On March 3, the metal reached $1,355, the highest for a most-active contract since Oct. 30.

The commodity slumped 28 percent last year amid a rally in equities and concern that the Federal Reserve would taper the pace of bond purchases.

Bullish Factor

“The Ukraine matter is still a worry among traders and investors, and has moved closer to the front burner of the marketplace,” Jim Wyckoff, a senior analyst at Kitco Metals Inc., a research company in Montreal, said in a report. “The Russian occupation of Crimea is a bullish factor for the safe-haven gold market.”

In Crimea, residents will have the choice of joining Russia in a March 16 referendum

Gold surged 70 percent from December 2008 to June 2011 as the central bank pumped more than $2 trillion into the financial system and lowered interest rates to a record to boost the economy.

The Fed announced a $10 billion reduction to bond buying at each of its past two meetings, leaving purchases at $65 billion. Fed Chair Janet Yellen said last month that the central bank probably will maintain its strategy of trimming stimulus.

Yesterday, holdings in exchange-traded products backed by gold rose 8.4 metric tons, the most since October 2012, to 1,762.5 tons, data compiled by Bloomberg show. Last month, assets dropped to the lowest since October 2009.

The Philadelphia Stock Exchange Gold & Silver Index of 30 companies has climbed 18 percent this year after plunging 49 percent in 2013.

The prices of precious metals with broader industrial applications fell as copper tumbled to the lowest since July 2010.

Silver futures for May delivery fell 0.5 percent to $20.815 an ounce on the Comex. The price dropped for the third straight session, the longest slump in seven weeks.

On the New York Mercantile Exchange, platinum futures for April delivery fell 0.9 percent to $1,464.60 an ounce.

Palladium futures for June delivery fell 0.8 percent to $770.50 an ounce.

To contact the reporters on this story: Debarati Roy in New York at droy5@bloomberg.net; Nicholas Larkin in London at nlarkin1@bloomberg.net

To contact the editors responsible for this story: Millie Munshi at mmunshi@bloomberg.net Patrick McKiernan, Joe Richter

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