Gold up on lower dollar, stocks; platinum, palladium add to gains

May 14, 2014

New York (May 14)  Gold rose on Wednesday after the dollar and European equities came under pressure as investors awaited confirmation of further stimulus from the European Central Bank.

Gold was also lifted by strong gains in platinum and palladium on worries that increasing labor tensions in major producer South Africa could hurt supply.

"Platinum and palladium are strongly up on the South Africa's stroke situation and that has provided some support for gold and silver," Quantitative Commodity Research director Peter Fertig said.

South Africa increased security in the platinum belt after four deaths over the weekend, to protect miners who have decided to ditch a 16-week strike that has halted 40 percent of normal global output.

Hundreds of miners barricaded roads near Lonmin's South African platinum mine on Tuesday, in an attempt to block fellow strikers from breaking rank and going back to work.

Spot gold rose 0.6 percent to $1,300.44 an ounce by 0945 GMT, while U.S. gold futures for June delivery $6.20 to $1,301.10 an ounce.

Platinum rose 1.3 percent to its highest in a month at $1,467.50. Palladium gained 1 percent to $819.60 an ounce.

The violence indicates "the potential for this strike to linger on as the inflexibility of the unions remains deeply entrenched," Nomura analysts said in a note.

"Although the majority of workers appear to want to return to work, the inability for adequate security to be provided is likely to erode the restart timeliness further," the analysts said. "The impact from stockpiles having been reduced will likely start to affect the market going forward."

South Africa is the top producer of platinum and second biggest producer of palladium after Russia.

In wider markets, the dollar was down 0.1 percent against a basket of currencies, while European shares dipped after the Bundesbank is ready to support further easing steps from the European Central Bank next month.

Ukraine concerns

Pro-Russian separatists ambushed Ukrainian troops on Tuesday, killing seven in the heaviest loss of life for government forces in a single clash since Kiev sent soldiers to put down a rebellion in the country's east.

With the uprising and Russia's annexation of Crimea poisoning East-West relations, Moscow retaliated against U.S. sanctions by hitting aerospace projects, including refusing to extend the life of the International Space Station, a showcase of post-Cold War cooperation.

"We remain constructive on the (precious metals) group as a whole as we think the geopolitical tensions with the Ukraine, coupled with the spiraling unrest in South Africa, will both combine to provide more upside impetus," saidINTL FCStone analyst Edward Meir.

Silver rose 1.2 percent to $19.71 an ounce.

The London silver "fix", a global benchmark for spot prices, will cease to operate after Aug. 14, the company that administers the process said on Wednesday, amid rising regulatory scrutiny of price-setting in bullion markets.

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