- Today’s AM fix was USD 1,371.00, EUR 982.30 and GBP 821.70 per ounce. Yesterday’s AM fix was USD 1,355.75, EUR 977.47 and GBP 817.01 per ounce.
- Gold rose $20.10 or 1.5% yesterday to $1,367.10/oz. Silver (COMEX:SIJ14) surged 47 cents or 2.2% to $21.28/oz.
Gold (COMEX:GCJ14) extended gains to a third session today, reaching fresh six month highs as investors hedged geopolitical risks and Chinese economic slowdown fears. Gold hit $1,375.20—it’s highest since Sept. 10 and has gained 14% so far this year on global geopolitical and macroeconomic risk.
A significant bond default in China and a weak exports report has sent equities and base metals lower in recent days. More data overnight showed China's economy slowed sharply in the first two months of the year, with growth in investment, retail sales and factory output all falling to multi-year lows.
The biggest factor driving gold prices at the moment is the increasing tension between the West and Russia over Ukraine. The EU agreed on a framework yesterday for its first sanctions on Russia since the Cold War.
Gold in US Dollars - 1 Year (Bloomberg)
This is a much stronger response to the Ukraine crisis than many expected and a mark of solidarity with Washington. Senior American military officials have been making hawkish sounds and warned that they are ready for a military response to Russia.
Russian government officials and businessmen are bracing for sanctions resembling those applied to Iran according to Bloomberg. Should Russian foreign exchange reserves and bank assets be frozen as is being suggested, then Russia would likely respond by wholesale dumping of their dollar reserves and bonds.
In retaliation, Russia could opt to only accept gold bullion for payment for their gas, oil and other commodity exports. This would likely lead to a sharp fall in the dollar and a surge in gold prices.
Currency wars could soon take the turn for the worst that many of us have warned of for some years.
Gold’s technical picture is increasingly positive after breaking resistance at $1,360/oz and the next levels of resistance are at $1,376/oz and $1,434/oz, the high from August 28th last year. In the short term, gold may be vulnerable to some profit taking and a period of correction and consolidation.