(Kitco News) - Rising tensions in Ukraine are providing some momentum for gold as prices start the week with a rally, moving above key levels said one analyst.
Electronic trading of June Comex gold futures opened the Sunday North American evening/Monday Asian session at $1,321 an ounce, up from Friday’s pit close of $1,319. Prices added to their opening gains and are just off of session highs; as of 8:20 p.m. EDT Comex June gold was trading at $1,326 an ounce.
Silver is also starting the week firmer. Electronic trading of May Comex silver futures opened Sunday evening/Monday morning at $20.035 an ounce, up from Friday’s close of $19.946. As of 8:20 p.m. EDT Comex May silver traded at $20.085.
Sunday morning, Ukrainian President Oleksandr Turchynov said in a televised address he is sending Ukrainian troops to the eastern part of the country in what the government is calling a “large-scale anti-terrorist operation” to squelch “pro-Russian insurgency.”
According to media reports, there has already been some bloodshed in the region. Ukrainian special forces exchanged gunfire with a pro-Russia militia outside the eastern city of Slovyansk. A Ukrainian security officer was killed and at least two others wounded.
In response, Russian diplomats called Sunday afternoon for an emergency meeting of the U.N. Security council to discuss in an “informal meeting” about the growing crisis in Ukraine. Tensions have been slowly rising for the last few weeks and Chris Weston, commodity analyst at IG Markets, said that there is now a real possibility that civil war breaks out in the country.
Last week, Weston said that he was expecting gold to bounce off $1,320 area and head lower; however, the shift in geopolitical tension has changed the short-term outlook and added he is taking his short-trades off the table.
“Gold broke above a key level of $1,321,” he said. “We’ve pulled above that level because the news has deteriorated. Civil war is a possibility so you want to stay positive on gold.”
Weston added safe-having buying of the yellow metal could offset the impact of improving U.S. economic data. On Monday markets will receive March U.S. retail sales, which Adam Button, currency strategist for Forexlive.com, said will be an important gauge to determine if U.S. consumers recovered from adverse weather conditions that gripped the country during the start of the year.
Weston said the data could help boost the U.S. dollar, which would – in normal circumstances – be negative for gold; however, because of the geopolitical concerns, he said he is seeing the negative correlation between gold and the greenback breakdown.
“The market is going to be focused on the Ukraine and people will want to protect themselves,” he said. “I think if we can close above $1,321, then $1,350 is the next goal for the market.”
By Neils Christensen of Kitco News; firstname.lastname@example.org