Gold Posts Biggest Gain in Four Weeks on Jet Crash in Ukraine

Jul 17, 2014 2:55 pm ET

July 17 (Bloomberg) -- Gold futures posted the biggest gain in four weeks after Ukraine said rebels shot down a Malaysian jet carrying 295 people near its border with Russia. Palladium extended a rally to a 13-year high.

The Boeing 777 flight from Amsterdam to Kuala Lumpur was hit by a missile and went down near the eastern town of Torez, Ukraine’s Interior Ministry said on its Facebook page. Gold rose earlier as the U.S. and the European Union imposed the most aggressive sanctions to date on Russian business.

Gold has rallied 9.5 percent this year, outperforming commodities, equities and Treasuries, as violence in Iraq and hostilities between Ukraine and Russia boosted demand for a haven asset. The metal also rose as the Federal Reserve has signaled interest rates will stay close to a record low.

The jet crash “heightened concerns over the tensions in Russia and Ukraine, and definitely triggered safe-haven buying,” Chris Gaffney, a senior market strategist at EverBank Wealth Management in St. Louis, said in a telephone interview.

Gold futures for August delivery rose 1.3 percent to settle at $1,316.90 an ounce at 1:35 p.m. on the Comex in New York, the biggest gain for a most-active contract since June 19. Trading was 29 percent above the 100-day average for this time, according to data compiled by Bloomberg.

The U.S. and the European Union said more sanctions may follow. Among the companies affected by the penalties announced yesterday were OAO Rosneft, Russia’s top oil company, natural gas producer OAO Novatek, OAO Gazprombank, the country’s third- largest lender, and eight defense firms.

Palladium Rally

Russia is the world’s biggest source of palladium, used mainly for devices to control pollution from autos. The price has also climbed this year after a five-month strike crippled output in South Africa, the second-biggest producer.

On the New York Mercantile Exchange, palladium futures for September delivery climbed 1 percent to $885.10 an ounce. Earlier, the metal reached $890, the highest since February 2001. Trading was 12 percent above the 100-day average, according to Bloomberg data.

European car sales in June rose for the 10th straight month, the longest run of gains in four years, an industry group said today.

“There’s a confluence of positive factors for palladium, with good car sales and supply constraints in South Africa,” Robin Bhar, an analyst at Societe Generale SA in London, said in a telephone interview. “With Russia, it’s more sentiment.”

Platinum futures for October delivery gained 1.2 percent to $1,503.70 an ounce on the Nymex, the biggest gain in two weeks. The metal is also used in catalytic converters. South Africa is the top producer. The strike at the three-biggest mining companies ended in June.

Silver futures for September delivery rose 1.7 percent to $21.134 an ounce on the Comex, the biggest gain in a week.

This year, palladium has jumped 23 percent, while platinum and silver gained more than 9 percent.

--With assistance from Nicholas Larkin in London.