Last year it was Syria…This year it’s Ukraine. Geopolitical tensions have always been a booster for gold and other precious metals and it has helped gold in enjoying its safe haven appeal as it always does in times of economic turmoil recession, inflation etc.
This week gold remained on the top and showed some interesting record movements too.
Gold prices bounced on Friday during the trading hours, rising 3.3 per cent from last week’s close at 1385$ per ounce, a level not witnessed since early September. Gold sailed through US$1,380 and was on course for a sixth successive week of gains as the situation in Ukraine showed no signs of easing.
Apart from the Ukraine Crisis deceleration of Chinese economic growth has dampened the investors risk appetites. Retail Sales and Industrial output figures were out this week and it has been quite disappointing. According to MNI, a Chinese Government source said not to panic if 1Q GDP would be below target. This once again raised the question that the all so hyped China and its economy and its hunger for gold was just a temporary thing? Well we need to wait and watch
This uncertainty surrounding the rising economies has to an extent eroded investors confidence. The catalyst for a shift in risk sentiment remains to be seen as the market shrugged off positive US data overnight, suggesting the potential for a lacklustre reaction to upcoming Consumer Confidence figures.
Gold continues to be well supported as Russia is seemingly un-phased by the prospect of sanctions from the West. The population in the Crimea province votes this weekend on whether to secede from the Ukraine, with the way the ballot has been set out seemingly certain to guarantee that is the outcome say observers. It is likely to be followed by the US and its allies imposing sanctions on Russia on Monday, potentially starting a round of tit-for-tat retaliation with serious implications for financial markets and the US dollar.
The last time gold had such a gold run was in July/August 2011, soon after which the metal started its climb to the all-time record high of $1,921 per troy ounce.
Looking at the week ahead, if emerging markets fears abate and US data continues to improve; traders may ease out of safe-haven plays like US Treasuries. The resulting rise in yields would likely help the greenback to recover some lost ground, which in turn would weigh on gold prices.
If situation in Ukraine results in unrest or rioting, gold prices would breach $1,400. But if the Ukrainian situation either resolves itself in the coming days or stabilizes to the current standoff and does not further escalate gold could sell off quickly — returning towards $1,300 an ounce.
Lots of ifs and buts for the Gold next move! But one thing is clear, safe haven appeal of Gold will always be there.
For the week gold is expected to range between $1364-$1420 an ounce in the international market and Rs.29,500-Rs.31,500 per 10 gram in the domestic market.
On the other hand, silver is expected to range between $20.55-$22.00 and Rs.45,000-Rs.48,00 in the international and domestic markets respectively.