Gold Slides as Traders Mull Russia, U.S. News
New York (Aug 15) Gold prices fell to the lowest level in nearly two weeks on Friday as signs of health in the U.S. economy outweighed news of a skirmish near the Ukraine-Russia border.
Gold for December delivery, the most-actively traded contract, fell $9.50, or 0.8%, to settle at $1,306.20 a troy ounce on the Comex division of the New York Mercantile Exchange. This was the lowest settlement since Aug. 5, when futures closed at $1,285.30 an ounce and is down 0.4% on the week.
Prices fell to $1,293 an ounce in early trade amid signs of diplomatic progress in eastern Europe, as Ukrainian border guards and customs officers inspected a convoy of nearly 300 trucks that Russia said carried humanitarian aid.
But gold pulled higher as news of a Russian incursion into Ukraine renewed concerns about stability in the region. Ukrainian troops engaged a column of armored vehicles that crossed into the country from Russia, destroying a large part of the military equipment, Ukrainian President Petro Poroshenko said. Russia has denied sending men and weapons into eastern Ukraine.
"There's enough uncertainty for prices to rebound and stabilize going into the weekend," said Bill O'Neill a principal with commodities investment firm Logic Advisors in Upper Saddle River, N.J.
The fact that gold prices didn't fully recoup the earlier losses reveals the complacency that many traders feel in relation to the Ukrainian conflict, said Bob Haberkorn, a senior commodities broker with RJO Futures in Chicago.
"We've had continuous flare-ups between Ukraine and Russia for months now, and traders are starting to see it as just another day," Mr. Haberkorn said. "An all-out war isn't in anyone's interest at this point."
In addition, crises in the Middle East appeared to cool, which weighed on gold prices. Hamas extended its cease-fire with Israel, while in northern Iraq, a U.S. assessment team concluded that the scale of the humanitarian crisis appears to be smaller than initially thought.
While some traders view gold as a shield from geopolitical and financial turmoil, their interest in the haven asset fades as their outlook brightens.
Still, the gold market remains under pressure as stronger U.S. economic data have stoked investor jitters about higher interest rates from the Federal Reserve. Gold costs money to store and struggles to compete yield-bearing assets when interest rates are on the rise.
On Friday, data showed that U.S. industrial production increased more than expected in July while producer prices, a measure of wholesale inflation, remained stable.
The Federal Reserve has indicated that it would raise interest rates for the first time since 2006 once the economy appears to be on firmer footing. Many investors and economists expect U.S. interest rates to rise sometime in 2015.
"The fact that gold couldn't get back to unchanged territory shows just how weak this market is right now," Mr. Haberkorn said.
In other precious-metals markets, palladium futures ended at new 13-year high on concerns that the Ukraine-Russia conflict could disrupt supplies. Russia is the world's largest producer of palladium, a metal that is widely used to scrub emissions from gasoline-fueled engines. Palladium for September delivery ended up $8.35, or 0.9%, at $894.50 a troy ounce, the highest settlement since Feb. 21, 2001, on Nymex.