Gold dips but Malaysian plane downing seen aiding sentiment

July 18, 2014

Singapore (July 18)  Gold dipped on Friday on profit-taking after jumping 1.5 percent overnight, but the metal is likely to be supported by a wave of risk aversion after a Malaysian airliner was downed in eastern Ukraine, killing nearly 300 people.
Gold, seen as an alternative investment during times of
geopolitical uncertainty, rallied on Thursday after news of the
plane crash, which a Ukrainian official said was caused by a
missile fired by pro-Russian militants.
    The incident sharply raises the stakes in a conflict between
Kiev and pro-Moscow rebels that has been going on for months,
and has escalated tensions between Russia and the West.
    "Geopolitical risks at the moment are quite elevated," said
Victor Thianpiriya, an analyst with ANZ.
    "The move overnight (in gold prices) is warranted given the
risks out there. In the near-term, we can certainly see some
more upside," he said.
    Spot gold slipped 0.3 percent to $1,312.80 an ounce
by 0655 GMT. Asian shares sagged and a drop in Treasury yields
pressured the dollar on Friday after news of the downed
Malaysian airlines jet sent investors scurrying into defensive
    However, the metal is still down nearly 2 percent for the
week, following a six-week winning streak, as fears of financial
troubles in a Portugal bank fade and as investors worry about a
sooner-than-expected hike in U.S. interest rates.
    In a measure of investment sentiment, SPDR Gold Trust,
the world's largest gold-backed exchange-traded fund, said its
holdings fell 2.69 tonnes to 803.34 tonnes on Thursday.
    "We expect high volatility in gold, as well as an
inclination to climb more than to dip," Phillip Futures analysts
said in a note, citing the geopolitical tensions.
    Among other precious metals, palladium was trading
near its highest since 2001 after the United States imposed its
toughest sanctions yet on Russia, the biggest producer of the
metal, over Moscow's failure to curb violence in Ukraine.

Source: Bloomberg

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