Gold advanced to a more than four-month high in London as concern of a conflict between Russia andUkraine boosted demand for a haven. Silver climbed.
Ukraine put its forces on combat readiness over the weekend after Russian President Vladimir Putin got parliamentary approval to send troops into its southern neighbor. U.S. President Barack Obama warned Russia not to intervene and Secretary of State John Kerry travels to Ukraine today to offer support as Russian troops occupy the Black Sea region of Crimea.
Bullion is the fourth-biggest gainer in 2014, after coffee, lean hogs and corn, on the Standard & Poor’s GSCI Index of 24 commodities as unrest in Ukraine and signs of slower economic growth boosted demand for a store of value. Gold rebounded from a 28 percent drop in 2013 as U.S. economic data from factory output to retail sales missed estimates just as the Federal Reserve started to scale back asset purchases.
“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.”
Bullion for immediate delivery rose as much as 1.8 percent to $1,350.37 an ounce, the highest since Oct. 30, and was at $1,345.92 by 9:31 a.m. in London. It’s up 12 percent this year. Gold for April delivery climbed 1.9 percent to $1,346.30 on the Comex in New York, where futures trading volume was 84 percent above the average for the past 100 days for this time of day, data compiled by Bloomberg showed.
Crimea, which belonged to Russia until Nikita Khrushchev gave it to Ukraine in 1954, is home to Russia’s largest overseas naval base. Tension escalated as Russian-backed Viktor Yanukovych was deposed as president by Ukrainian lawmakers on Feb. 22 after clashes with protesters left at least 82 dead.
“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, on gold by 25 percent to 113,911 contracts in the week to Feb. 25, the highest since December 2012, U.S. Commodity Futures Trading Commission data show. Holdings in gold-backed exchange-traded products expanded 6.9 metric tons to 1,746 tons in February, the first monthly increase since December 2012, data compiled by Bloomberg show.
Bullion slumped the most since 1981 last year as U.S. policy makers prepared to slow stimulus. Fed ChairJanet Yellen said last week the central bank is “open to reconsidering” the pace of scaling back 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 has been in an upwards trend since the start of the year and today was pushed higher by risk aversion,” Bjarne Schieldrop, the chief commodity analyst in Oslo at SEB AB, said today by e-mail. “U.S. quantitative easing does push $65 billion into the market with a need for a home.”
Silver for immediate delivery rose 1.4 percent to $21.5217 an ounce. Palladium added 0.6 percent to $746.90 an ounce, reaching $748.47, the highest since Jan. 24. Platinum climbed 0.7 percent to $1,455.88 an ounce. It touched $1,457.38, the highest since Jan. 24.
The Association of Mineworkers and Construction Union, with more than 70,000 members, began a strike on Jan. 23 in South Africa at Anglo American Platinum Plc, Impala Platinum Holdings Plc and Lonmin, the world’s largest platinum producers.