Gold retreats as firmer dollar offsets Russia concerns
London (Aug 7) Gold edged lower on Thursday after rising more than 1 percent the previous day as a firmer dollar offset concerns that tensions between Russia and the West over Ukraine could escalate.
A build-up of Russian troops on the border with Ukraine and tit-for-tat economic sanctions between the West and Moscow on Wednesday drove investors out of assets seen as higher risk including stocks and into the relative safety of bonds and gold.
European shares, which had fallen sharply, showed signs of stabilising on Thursday, while the dollar index edged up 0.1 percent. Gold, which is priced in dollars, tends to lose ground when the U.S. unit firms.
Spot gold was down 0.2 percent at $1,302.20 an ounce at 0933 GMT, while U.S. gold futures for December delivery were down $4.70 an ounce at $1,303.40.
"There are a lot of crosswinds going on for gold," Deutsche Bank's global head of commodity research, Michael Lewis, said. "You have long-term U.S. real yields going down to new lows and geopolitics, which should be supportive, but on the flip side you have dollar strength coming through and equities hitting new highs."
European stock indexes hit a string of new highs in June and July and remain close to those levels.
"Those various forces are working against each other, which is maybe why we're still in this rangebound market," Lewis said.
Russian stocks and the rouble fell after President Vladimir Putin signed a decree on Wednesday halting or limiting imports of agricultural products from countries that have imposed sanctions on Russia over the Ukraine crisis.
BUYING SLOWS IN CHINA
In the physical markets, buying slowed on Thursday after prices rose above $1,300 an ounce. Premiums in top buyer China dropped to about $1 an ounce from $2-$3 in the previous session.
Demand had already been sluggish due to the seasonally quiet summer period and on expectations of a further drop in prices.
Investor sentiment in bullion still seemed fragile on persistent worries over possible tightening of monetary policy in the United States.
Holdings in the world's largest gold-backed exchange-traded fund, New York-listed SPDR Gold Trust, fell 2.4 tonnes to 797.65 tonnes on Wednesday.
Among other precious metals, silver was up 0.1 percent at $19.97 an ounce. The gold/silver ratio, which measures the number of silver ounces needed to buy an ounce of gold, edged off the eight-week high it hit on Wednesday as silver clawed back some lost ground against gold.
Spot platinum was up 0.7 percent at $1,461.90 an ounce, while spot palladium was up 0.6 percent at $852.22 an ounce.