Gold price steady on safe-haven demand from Ukraine tensions

May 12 2014, 13:31 IST
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SummaryGold price recovered on Monday after falling to its lowest in a week earlier in the session, boosted by safe-haven demand from escalating geopolitical tensions in Ukraine.

Gold price recovered on Monday after falling to its lowest in a week earlier in the session, boosted by safe-haven demand from escalating geopolitical tensions in Ukraine.

Spot gold was little changed at $1,289.60 an ounce by 0655 GMT, after dropping to a one-week low of $1,279.60 earlier on a softer euro.

The euro has lost more than 1 percent since Thursday when the European Central Bank said it was ready to take action next month should updated inflation forecasts merit it. A stronger dollar in turn makes bullion more expensive for holders of other currencies.

In Ukraine, pro-Moscow rebels declared a resounding victory in a referendum on self-rule for eastern Ukraine, with some saying that meant independence and others eventual union with Russia as fighting flared in a conflict increasingly out of control.

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

"Prices are treading water at the moment," said Victor Thianpiriya, an analyst at ANZ, adding that developments in Ukraine were probably not big enough to move gold prices sharply.

INTL FCStone analyst Edward Meir said investors seems to be growing increasingly complacent about the crisis, "perhaps figuring that the worst case scenarios were not materializing."

"The more the crisis remains localized, the more pressure there will be on gold prices going forward," Meir said.

Meanwhile, subdued buying in the physical markets is also hurting sentiment towards gold.

Friday data showed that gold imports in India, the second-biggest consumer of bullion, fell 74 percent in April to $1.76 billion from a year earlier due to import restrictions.

In top buyer China, local premiums over the global benchmark have climbed to about $3 an ounce after trading at a discount for most of the last two months on weak demand.

But they are still much lower than the over-$20 premiums seen earlier in the year.

ANZ's Thianpiriya said unless premiums climbed to $7 or $8, Chinese buying wouldn't have much impact on prices.

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