BackGold rises on concern over Ukraine crisis, Chinese growth
Traders expect gold to stay supported between $1,330 and $1,350 ahead of the Fed's policy meeting on 18-19 March
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London: Gold rose on Tuesday as fears of a slowdown in Chinese economic growth and worries about the crisis in Ukraine sapped appetite for risk.
Tensions over Ukraine continued to build and with diplomacy at a standstill, European Union governments said they were considering sanctions against Russia if it failed to respond positively to an initiative to calm the crisis.
Ukraine said it would raise a new national guard force in response to Russian attempts to annex Crimea, a day after a pro-Russian force opened fire while seizing a Ukrainian military base there.
“There is still a good deal of safe-haven bidding in the market on Ukraine and any possible Russian response and that’s helping get beyond that crucial $1,350 technical and psychological level," Mitsubishi analyst Jonathan Butler said.
“These levels we can see some profit-taking but also some new investor positioning as part of geopolitical concerns that link into that demand for safe assets."
In times of economic and geopolitical uncertainty, gold is seen as an alternative investment to assets perceived as riskier.
Spot gold rose to a session high of $1,352.50 an ounce and was up 0.6% to $1,346.16 an ounce by 1532 GMT, while gold futures for April delivery rose 0.4% to $1,347.10 an ounce.
European and US equities were little changed, while the dollar fell 0.1% versus a basket of main currencies.
Traders expect gold to stay supported between $1,330 and $1,350 ahead of the US Federal Reserve’s policy meeting on 18-19 March.
The central bank is most likely to announce another $10 billion cut to its bond-buying stimulus after a series of US economic data showing that growth has been hurt by severe cold weather.
Weak Chinese exports data for February is also making investors opt for safe-haven gold rather than equities.
Fund inflows
In a sign confidence in the precious metal may be returning amid global uncertainties, the world’s biggest bullion-backed exchange-traded fund saw its largest inflow in a month.
SPDR Gold Trust said its holdings rose 7.50 tonnes to 812.70 tonnes on Monday - the biggest inflow since 13 February.
“The ETF space continues to be a source of positive energy for gold this month, after posting the first net gain in more than a year in February," UBS said in a note.
“The improvement in ETF investor sentiment towards gold is also helping the market hold well at current levels, in spite of over-extended spec positioning and easing physical demand."
In the physical market, Chinese prices continued to trade at a discount to spot prices due to weak demand. Prices in Shanghai were at a discount of $3 an ounce to London prices, compared with a premium of over $20 at the beginning of the year.
Among other precious metals, a public spat emerged on Monday between South Africa’s labour mediator and the Chamber of Mines over the mediator’s handling of talks to end an almost seven-week strike in the platinum sector, further dashing hopes of any breakthrough.
Platinum was flat at $1,471.49 an ounce, having hit a six-month high of $1,486.00 hit last week.
Palladium rose 0.1% at $774.00 an ounce.
Silver gained 0.6% to $20.93 an ounce. REUTERS
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