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Gold Higher On China And Ukraine Uncertainty
Posted March 13th, 2014
TANGIBLE INVESTMENTS - Los Angeles - by James O'Dell - The price of Gold hit $1,374.85 an ounce on Thursday, and looks poised for a try at the $1,400 an ounce level. Silver eased a bit to $21.18 an ounce after gaining more than 2.5 percent on Wednesday, as the dollar fell to 2-1/2 year lows against the euro. The rally in gold has gained some momentum from news of China's first corporate bond failure, weakness in China’s yuan and plunging copper prices that have shaken investors, according to UBS.
“Concerns that current issues in China could morph into something more sinister for the economy, and continued tensions between the West and Russia are helping gold make the most of its role as an insurance against tail risks,” says UBS. “Gold prices continue to head north in the slow and orderly fashion that has been evident so far this year.”
Gold has also been pushed higher this week on growing concerns that the tensions now building between Russia and the West over Ukraine could quickly develop into something much worse. This has made gold an attractive alternative to equities as evidenced by the Dow plunging triple digits on Thursday.
"It is currently the political developments in Ukraine, which are having a negative impact on the stock markets, that are supporting gold," said Peter Fertig, of Quantitative Commodity Research. Uncertainty over the future of the Crimean peninsula has Ukraine's banking system under pressure as customers line up to withdraw cash, while Russian troops prepare for Sunday's referendum on seceding from Ukraine.
Oleh Serha, of Privat bank, said all Crimean banks have struggled to deliver cash to the region, and have imposed a daily withdrawal limit of 1,500 hryvna ($150) throughout Ukraine. Gold prices will continue to hold their gains as long as geopolitical tensions remain elevated, according to analysts.
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