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Gold Climbs To Near 6-Month High On Concerns About Ukraine, China

By Allen Sykora of Kitco News
Wednesday March 12, 2014 9:41 AM

(Kitco News) - Gold rose to its highest level in nearly six months Wednesday on the combination of geopolitical tensions surrounding Ukraine, worries about bond defaults in China and technically oriented buying.

As of 9:23 a.m. EDT, gold for April delivery was $17.90, or 1.3%, higher at $1,364.60 per ounce on the Comex division of the New York Mercantile Exchange. It peaked at $1,367.30 an ounce, its strongest level since Sept. 20. May silver was up 25 cents, or 1.2%, to $21.065 an ounce.

“I think what we’re having here is continued nervousness about…the EU (European Union) situation – where the fear of deflation is again taking hold – along with continued worries about the situation in Crimea and the Ukraine leading people into the gold market,” said Sterling Smith, futures specialist with Citi Institutional Client Group.

“Gold seems to be playing its alternative currency card here at the moment,” Smith continued. “We’re seeing most currencies generally steady to a little bit weaker. Gold is one of the few positive items we have out there.”

Gold has also drawn technically oriented buying, Smith said. The metal broke above last week’s $1,355 high and also took out the highs from late October just over $1,360 an ounce. Buy stops were hit, Smith said.

“It’s still coming on the back of the uncertainty in the global economy,” said Mike Dragosits, senior commodity strategist with TD Securities. “China has not been doing particularly well in terms of economic data. And, they had their first-ever corporate default (Chaori Solar Energy Science & Technology Co.) within the country and now there are rumors that there is a second one on the near horizon. I guess the question is – where does it go from here and how many more are we going to see?”

This is adding to the safe-haven bid for gold, he said.

“Then you also have the underlying story of the Russia-Ukraine situation,” Dragosits said. “It still has not gone away.”

Ukraine’s Crimea region has been overrun by Russian troops. A referendum has been scheduled in Crimea for Sunday on whether to unite with Russia.

“Russia has said they will recognize it (the referendum) and basically the rest of the world has said they won’t recognize it,” Dragosits said.

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A New York desk trader said gold is continuing its bounce from double-bottom support at the end of last year. April gold fell as far as $1,182.30 on New Year’s Eve, coinciding with the low of $1,179.40 from June on a futures continuation chart.

“It’s established a long-term support area and is simply bouncing off of that,” he said. “We have the equivalent of a double-bottom.”

Traders are coming back into the precious metal, encouraged by crises such as the Ukraine issue, he said.

Afshin Nabavi, head of trading with MKS (Switzerland) SA, put the next resistance for gold around $1,375. For now, he put support around $1,340 to $1,345. He said some longs may opt to take profits after the run-up.

Gold’s rally is “quite impressive” considering the weakness in many other commodities, Smith said. He pointed out that crude oil is lower, most grains other than wheat are softer, and coffee and cocoa are under pressure.

By Allen Sykora of Kitco News; asykora@kitco.com



Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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