Gold Rises From Five-Week Low as Ukraine Concerns Mount

Gold rose from a five-week low after the U.S. and its allies in the Group of Seven threatened more sanctions to deter Russia from further incursions into Ukraine, boosting demand for the precious metal as a haven.

President Barack Obama urged Russia to defuse the crisis over Ukraine or face more sanctions if it encroaches further into the country after the annexation of Crimea. Gold declined 3.1 percent last week after Federal Reserve Chair Janet Yellen said interest rates may start to rise in early 2015.

“There is some safe-haven buying because of Russia,” Tom Power, a senior commodity broker at R.J. O’Brien & Associates in Chicago, said in a telephone interview. “We could also see some increase in physical demand after the big price drop.”

Gold futures for June delivery rose less than 0.1 percent to settle at $1,311.40 an ounce at 1:45 p.m. on the Comex in New York. Earlier, the price touched $1,305.90, the lowest for a most-active contract since Feb. 14. Trading was 38 percent higher than the average for the past 100 days for this time, according to data compiled by Bloomberg.

This year, gold has climbed 9.1 percent on signs of a faltering global economy, whiled Russia’s annexation of Crimea sparked the most-serious confrontation with the West since the Cold War.

Yesterday, gold dropped 1.9 percent, the most in 13 weeks, with the outlook for higher U.S. interest rates damping demand for the metal as a store of value. Last week, Fed policy makers announced the third $10 billion cut in monthly bond purchases.

‘Traders Torn’

Gold jumped 70 percent from December 2008 to June 2011 as the Fed pumped more than $2 trillion into the financial system and held borrowing costs near zero percent to boost the economy.

“Traders are torn between the potential support from a rise in geopolitical risks and the negative impact of rising U.S. interest rates as the economy improves,” Ole Hansen, head of commodity strategy at Saxo Bank A/S in Copenhagen, said in a report.

Yesterday, holdings in the SPDR Gold Trust, the world’s biggest exchange-traded product backed by the metal, increased 0.6 percent to 821.47 metric tons, the highest since Dec. 13.

The Central Bank of Iraq said it purchased 36 tons of gold this month to help stabilize the dinar. The acquisition was the biggest by a nation in three years.

On the Comex, silver futures for May delivery fell 0.4 percent to $19.979 an ounce. Earlier, the price touched $19.905, the lowest since Feb. 7. The metal has climbed 3.1 percent in 2014.

Futures dropped for the seventh straight session, the longest slump in almost a year. On March 21, the spot gold-silver ratio rose to the highest since Aug. 7.

Palladium futures for June delivery dropped 0.6 percent to $789.40 an ounce on the New York Mercantile Exchange. Yesterday, the price reached $802.45, the highest since August 2011.

Platinum futures for April delivery declined 0.7 percent to $1,420.90 an ounce. The price touched $1,420, the lowest since Feb. 27.

To contact the reporters on this story: Debarati Roy in New York at droy5@bloomberg.net; Maria Kolesnikova in London at mkolesnikova@bloomberg.net

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

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