Russia Shuts Off Gas To Ukraine While ISIS Ravages Iraq

  • Posted Monday, June 16, 2014 at 08:41 PM

TANGIBLE INVESTMENTS - Los Angeles - by James O'Dell - Gold and Silver prices edged modestly lower on Monday with Gold at $1,274.10 an ounce and Silver at $19.70 an ounce after shorter term investors took profits. Geopolitical unrest in Iraq continues to increase while tensions build between Russia and Ukraine over missed energy payments and the shutoff of natural gas supplies to the Eastern European nation.

While fighting in Eastern Ukraine continues, Russia, in a move that looks politically motivated, abruptly cut off gas supplies to Ukraine on Monday. After a failure by negotiators to extend a deadline for past due payments, and a deal for a firm gas price could not be reached, Russia halted deliveries on all supplies not paid for in advance.

“Ongoing geopolitical tensions should support gold in the near term, however in the lead up to the FOMC [Federal Open Market Committee] the topside potential should be somewhat limited,” said MKS.

Two new policymakers will participate in their first FOMC policy meeting on Tuesday and Wednesday, Stanley Fischer, former Bank of Israel governor, was sworn in as Fed vice chair on Monday, while Lael Brainard joined the central bank's board of governors. Fed Chair Janet Yellen will hold her quarterly press conference on Wednesday following the Fed's June policy statement.

Meanwhile, Gold's primary focus in the near term is the geopolitical tension currently surrounding the militant ISIS and Iraq. The conflict is threatening to limit oil production from Iraq’s three biggest oilfields; Rumaila, West Qurna-2, and Majnoon, all of which lie in the south. "Escalating violence in Iraq is going to be bullish for gold and technically we could see another leg up pushing gold above $1,300," said Societe Generale's Robin Bhar.

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