Gold price climbs to 3-week high on Ukraine tensions, short covering

May 05 2014, 13:21 IST
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SummaryGold jumped to a three-week high on Monday, gaining for a second straight session on short-covering and as rising tensions and violence in Ukraine burnished the metal's safe-haven appeal.

Gold jumped to a three-week high on Monday, gaining for a second straight session on short-covering and as rising tensions and violence in Ukraine burnished the metal's safe-haven appeal.

Investors remained cautious on whether the gains can be sustained as several markets were closed and as outflows from the top gold fund continued to indicate bearish sentiment.

Spot gold was up 0.5 percent at $1,306.29 an ounce by 0633 GMT, after rising to $1,308.50 earlier - its highest since April 15. Liquidity is expected to be thin with markets in Japan, South Korea and London closed.

"We tested the downside quite aggressively last week. So gold is rising on short covering and on expectations that the Ukraine situation could get worse," said a trader in Hong Kong.

"We will be supported above $1,300 until we get liquidity back in tomorrow."

Pro-Russia militants stormed a Ukrainian police station in Odessa on Sunday and freed nearly 70 fellow activists as the country's leaders lamented a police force they said was undermined by graft or collaboration with separatists.

Militants smashed windows and broke down the gate at the police compound two days after over 40 pro-Russia activists died in a blaze at a building they had occupied after clashes with pro-Kiev groups.

Gold is seen as a safe-haven investment in times of economic and political uncertainty.

On Friday, the metal fell to a one-week low of $1,276.60 after strong U.S. jobs data. But it reversed the losses to end the day up 1.3 percent on a sharp increase in the number of people dropping out of the workforce and rising Ukraine tensions.

Still, SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings fell 2.70 tonnes to 782.85 tonnes on Friday - its third straight session of losses. Last week alone, the fund saw nearly 10 tonnes in outflows.

Hedge funds and money managers cut their bullish bets in gold futures and options, as expectations of a stimulus cut by the Federal Reserve dented the metal's appeal as a hedge, data from the Commodity Futures Trading Commission showed on Friday. In the

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