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Business News/ Market / Stock-market-news/  Gold falls more than 1% as Ukraine tensions ease
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Gold falls more than 1% as Ukraine tensions ease

Spot gold falls 1.3% to $1,333.50 and is heading for its worst daily loss since 30 Jan

Gold rallied nearly 2% on Monday as investors, alarmed by East-West tensions, piled into bullion and government debt. Photo: BloombergPremium
Gold rallied nearly 2% on Monday as investors, alarmed by East-West tensions, piled into bullion and government debt. Photo: Bloomberg

London: Gold fell more than 1% on Tuesday, retreating from the previous day’s four-month high, after President Vladimir Putin said Russia would only use military force in Ukraine as a last resort.

The precious metal rallied nearly 2% on Monday as investors, alarmed by East-West tensions, piled into bullion and government debt.

Crude oil futures climbed while stock markets plunged. Those moves went into reverse early on Tuesday, with world shares and hard-hit Russian assets recovering some lost ground after Putin’s remarks.

Financial assets failed to retrace the whole of the sharp moves seen globally on Monday.

Spot gold fell 1.3% to $1,333.50 by 1434 GMT and was headed for its worst daily loss since 30 January. US gold futures for April delivery were down $16.70 an ounce at $1,333.50.

“We need to hold Friday’s lows, otherwise a deeper correction could be looming," Ole Hansen, Saxo Bank’s head of commodity strategy, said.

“The Ukraine situation has eased but not gone away so we will continue to see market reactions to news from the region, but at least the risk of war, which was the main driver for gold, has now been reduced."

“Hedge funds have taken over the baton from (reduced) physical buyers in China, and as they are much quicker to react to changing sentiment, the risk has suddenly switched back to the downside," he added.

Gold remains up 0.6% this week, having reached its highest since 30 October on Monday at $1,354.80 an ounce. However, its could be vulnerable to data releases later this week, VTB Capital analyst Andrey Kryuchenkov said, including ADP jobs figures on Wednesday, a European Central Bank (ECB) statement on Thursday, and Friday’s US non-farm payrolls.

“Gold is a sell ahead of macro headlines this week, bar geopolitical tensions, with an overhang of speculative longs, easing physical flows and a potentially stronger dollar," he said.

Consumer Demand Softens

In the physical market, dealers in Singapore noted selling, which kept premiums for gold bars unchanged at 80 cents to $1 an ounce to spot London prices. Weakening differentials between 99.99% purity gold on the Shanghai Gold Exchange and cash gold were likely to crimp demand from China.

India’s commerce and industry minister Anand Sharma said on Tuesday he had raised the issue of easing some curbs on gold imports with the finance ministry, as the restrictions were encouraging smuggling and hurting the gems and jewellery industry.

India lost its spot as the world’s biggest gold consumer to China last year, after the government imposed the restriction on imports to narrow the current account deficit.

Silver dropped 1.7% to $21.01 an ounce, while spot platinum was down 0.6% at $1,444.25 an ounce and spot palladium gained 0.4% at $749.22 an ounce.

South Africa’s Association of Mineworkers and Construction Union on Tuesday lowered its wage demands for the first time, raising hopes of a breakthrough after nearly six weeks of strikes at the world’s top platinum producers. Reuters

Lewa Pardomuan in Singapore contributed to this story.

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Published: 04 Mar 2014, 08:46 PM IST
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