Gold Falls to 18-Week Low as Ukraine Worries Ease

May 28, 2014

New York (May 28)  Gold prices fell to the lowest level in 18 weeks Wednesday, as investors ditched the safe-haven metal following decreasing tensions in Eastern Europe and solid U.S. economic numbers.

Gold for June delivery, the most actively traded contract, closed down 0.5%, or $6.20, at $1,259.30 a troy ounce on the Comex division of the New York Mercantile Exchange, the lowest level since Feb. 7. The move follows a nearly 2% drop on Tuesday.

Prices for the precious metal spent most of May hovering around $1,300 an ounce, as investors weighed fallout from the political conflict between Russia and Ukraine against an improving U.S. economic picture. The scales tipped in the last few days, after a weekend presidential election in Ukraine went off without a hitch and Russia indicated a willingness to work with the new government. As the conflict between the two countries eases, investors see less of a need to hold gold, which some use as a haven in times of political or economic uncertainty.

"Ukraine was the only bullish catalyst out there," said James Cordier, a principal at Liberty Trading Group. "When that was removed, there was very little reason to hold on to gold positions."

The metal also took a knock Tuesday after data for U.S. consumer confidence in May and durable-goods orders in April surpassed expectations.

Despite its recent drop, some analysts said gold has held up better than expected, considering the unfavorable conditions. However, "with little support coming through from macro data, geopolitical events and physical demand, we believe it's only a matter of time before that resilience becomes exhausted," said Edel Tully, a strategist at UBS, in a note to investors.

Prices are likely to hit $1,250 an ounce within a month, UBS said.

In other markets, palladium prices rallied 1.1% to close at a 33-month high of $839.85 a troy ounce as concerns persisted that world supplies are tightening amid a continuing miners' strike in South Africa, the world's second-largest exporter of the metal. The gains came even as South Africa's new mining minister vowed to end the 18-week strike, which has brought platinum output to a near halt and weakened the country's economic growth.

Platinum for July delivery ended flat at $1,462.70 an ounce, after touching a two-week low earlier in the day.

Settlements (ranges include open-outcry and electronic trading):

London PM Gold Fix: $1,263.50; previous PM $1,275.50

June gold $1,259.30, down $6.20; Range $1,255.80-$1,267.30

July platinum $1,462.70, up $0.04; Range $1,442.70-$1,468.80

June palladium $839.85, up $9.20; Range $830.55-$844.65

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