With the Russians taking over a natural gas station in the village of Strilkove, Ukraine, the tensions are heated up again as EU and US impose sanctions against Russian and Ukrainian officials who are deemed responsible for a contested independence referendum in Crimea. Crimea’s regional assembly declared independence from Ukraine after the referendum, and applied to join Russia. The US and EU condemned it as illegal and in violation of Moscow’s own international commitments to preserve the territorial integrity of Ukraine.
Analysts believe that the tensions in Ukraine will further push up precious metal, and gold prices are expected build on its recent gain of 14% this year. Bullion prices closed at $1,382 on Friday, the highest level in six months, and the sixth straight weekly rise. On a similar trend, gold April contracts, the most active contract, gained $6.60 to settle at $1,379.00 a troy ounce on the Comex division of the New York Mercantile Exchange, up 3% on the week.
The increasing political tensions will continue to affect gold prices and traders are closely following the move.
Sources:
http://www.reuters.com/article/2014/03/03/us-markets-global-idUSBRE96S00E20140303
http://www.mining.com/gold-prices-to-rally-this-week-on-ukraine-and-china-worries-15420/
http://www.forbes.com/sites/dougschoen/2014/03/16/russia-invades-ukraine/
3 Comments
As people take their money out of Russia, investors will need other places to invest. Generally as they begin to see volatility in other markets, gold and bullion will be a more stable and worthy investment.
Puhleeese … “more stable and worthy of investment” is horse prac. No empirical support.
Be careful of “the sun also rises” stories – journalists who cover financial markets perforce have to write at least one story a day that attributes changes to something, anything! After the requisite number of column-inches of prose (seconds of air time filled), they then conclude “…and so today we see that the sun rose.”
So … is 3% an unusual rise? I just checked (March 25th, about 1 week later) and gold is at $1,311 or $71 (5%) lower. In euros (likely more important for Russians than dollars) the price has varied by 30% over the past 12 months [26% if we look at US$]. Furthermore, unlike a portfolio of stocks or bonds, there is no intrinsic return of a dividend or interest payment (but there are out-of-pocket costs to store gold). So like other commodities there’s a negative correlation with interest rates, because that lowers the opportunity cost of holding a commodity. Again unlike commodities, for which there is a floor of “real” demand, gold has few industrial uses, and jewelry doesn’t look any different if it’s plated rather than solid 24K gold. So it has no real intrinsic price to serve as the “firm foundation” found in standard stock pricing models.
Why gold garners such PR is thus a mystery. The people I know personally who are “gold bugs” are conservatives prone to believing in conspiracy theories. The 19th century was a golden era (it has to be a time period sufficiently in the past to have been romanticized, and not subject to objections by family and neighbors who have some claim to memories grounded in facts). Modern money is a conspiracy, the government is out to get you with dollars and euros that have no firm foundation since their backing with the full faith and credit of the government … well, they have neither faith in government nor a belief in credit. So they can be sold on gold, and there’s a well-connected set of schemers and scammers to polish their beliefs and separate them from some of that worthless green stuff …. likely malapropos to this context as I don’t know the hues of the ruble.
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