Gold Futures Advance as Ukraine Turmoil Bolsters Haven Demand

Apr 16, 2014 3:50 pm ET

April 16 (Bloomberg) -- Gold futures advanced, rebounding from the biggest drop in 16 weeks, as turmoil in Ukraine spurred demand for the precious metal as a haven.

Ukraine accused Russia of fueling “terrorism” in its eastern provinces. The U.S. and its European allies are threatening a new round of penalties against Russian interests. Envoys from Ukraine, Russia, the U.S. and European Union are scheduled to hold talks tomorrow in Geneva. Gold climbed as much as 0.5 percent after slumping 2 percent yesterday.

“As long as there’s uncertainty in Russia, having some exposure to gold makes sense,” Phil Streible, a senior commodity broker at R.J. O’Brien & Associates in Chicago, said in a telephone interview. “With the selloff yesterday, it seems like cheaper insurance today.”

Gold futures for June delivery rose 0.2 percent to settle at $1,303.50 an ounce at 1:40 p.m. on the Comex in New York. The decline yesterday was the biggest since Dec. 19.

The metal has climbed 8.4 percent this year, partly on signs of a faltering U.S. economy and speculation that the Federal Reserve may slow the pace of tapering monetary stimulus.

“There is little question that the economy has remained far from maximum employment,” Fed Chair Janet Yellen said in a speech today. She said in March that borrowing costs may start to rise “around six months” after the conclusion of asset buying, which economists forecast will end this year. Since then, minutes of the Fed’s last meeting played down forecasts for higher interest rates.

‘Modest’ Growth

The Fed in March reduced the monthly pace of bond purchases by $10 billion to $55 billion, and signaled additional cuts in “further measured steps.” Gold jumped 70 percent from December 2008 to June 2011 as the Fed bought debt and cut interest rates to a record in a bid to boost the economy.

Eight of the Fed’s 12 districts described growth as “modest or moderate,” the central bank said today in its Beige Book business survey, based on reports gathered through April 7. Consumer spending increased with better weather in most parts of the country in March and early April, according to the Fed.

In 2013, gold tumbled 28 percent, the most since 1981, amid a U.S. equity rally to a record and muted inflation.

Silver futures for May delivery gained 0.7 percent to $19.634 an ounce on the Comex. Yesterday, the price touched $19.22, the lowest for a most-active contract since Feb. 3.

On the New York Mercantile Exchange, platinum futures for July delivery fell 0.5 percent to $1,437.80 an ounce.

Palladium futures for June delivery rose 0.8 percent to $802.30 an ounce.

Holdings in exchange-traded products back by platinum and palladium have climbed to records, data compiled by Bloomberg show.

In South Africa, the top platinum producer and the second- biggest source of palladium, miners have been on strike since Jan. 23.

Russia, the leading source of palladium, may face more sanctions from the U.S. and its European allies.

--With assistance from Glenys Sim in Singapore.