Gold Climbs to Four-Month High as Ukraine Tension Boosts DemandDebarati Roy and Nicholas Larkin
Gold advanced to the highest in more than four months as escalating tension between Russia and Ukraine boosted demand for a haven. Silver climbed.
Ukraine said Russia’s navy ordered two of its ships in Crimea to surrender amid the worst standoff between the West and Russia since the end of the Cold War. U.S. Secretary of State John Kerry is traveling to Kiev today and European Union foreign ministers discussed sanctions against Russia.
Prices rebounded 12 percent this year after the biggest slump in more than three decades in 2013 as unrest in Ukraine and signs of slower global economic growth boosted demand for a store of value. Bullion is the third-biggest gainer in 2014, after coffee and lean hogs, on the Standard & Poor’s GSCI Spot Index of 24 commodities.
“It seems as if the confidence in gold as a safe-haven asset is returning,” Scott Gardner, who helps manage $400 million at Verdmont Capital SA in Panama City, said in a telephone interview. “Geopolitical concerns and worries about a slowdown in the U.S. and other parts of the world are pushing people to gold.”
Gold futures for April delivery rose 2.2 percent to settle at $1,350.30 an ounce at 1:54 p.m. on the Comex in New York. Prices touched $1,355, the highest for a most-active contract since Oct. 30.
“It’s a bit of a safe-haven story,” Ole Hansen, a Copenhagen-based commodity strategist at Saxo Bank A/S, said today by phone. “The market is pricing in some uncertainty, and we need to see an escalation for that to be a driver to take gold higher. If we are seeing a slowdown in economic activity, that obviously also lends support to gold.”
Gold declined 28 percent in 2013 after investors lost faith the precious metal as a store of value amid a rally in equities and muted inflation. Prices also fell as the Federal Reserve prepared to slow the pace of monetary stimulus. Fed Chair Janet Yellen said last week that the central bank is “open to reconsidering” the pace of cutbacks in asset purchases should the economy weaken. The Fed, which next meets March 18-19, announced a reduction to bond buying at each of its past two meetings, leaving purchases at $65 billion.
Gold surged 70 percent from December 2008 to June 2011 as the central bank pumped more than $2 trillion into the financial system to boost growth.
“In times of military conflict, you tend to get an initial knee-jerk reaction, which is what this seems like,” Joel Crane, an analyst at Morgan Stanley, said by phone from Melbourne.
Hedge funds and other money managers boosted their net-long position, or bullish bets, by 25 percent on gold to 113,911 contracts in the week to Feb. 25, the highest since December 2012, U.S. Commodity Futures Trading Commission data show.
Silver futures for May delivery rose 1.1 percent to $21.485 an ounce on the Comex.
Palladium futures for June delivery climbed 0.7 percent to $750 an ounce on the New York Mercantile Exchange. Prices touched $750.75, the highest since Jan. 21. Platinum futures for April delivery added 1 percent to $1,460.70 an ounce. The metal touched $1,464.90, the highest since Jan. 23.
More than 70,000 Association of Mineworkers and Construction Union members have been on strike since Jan. 23 at Anglo American Platinum Ltd., Impala Platinum Holdings Ltd. and Lonmin Plc mines in South Africa, the world’s top producer of the metal.