Gold Price at highest in a week on global political concerns

April 11, 2018

London (Apr 11)  Gold rose for a fourth day on Wednesday as the concern over escalating tension in Syria, US sanctions on Russia and the US-China trade stand-off weighed on stock markets and helped knock the dollar index to a two-week low.

The metal reached its strongest in a week as appetite for nominally lower-risk assets sharpened. Palladium, which has also benefited from the fear that sanctions on Russia could hurt supply, rose further after climbing nearly 6% in the last two days.

Spot gold was up 0.5% at $1,345.80/oz by 9.57am GMT, while US gold futures were 0.2% higher at $1,349.10/oz.

"We’ve seen fears of a trade war and now more recently the Russian sanctions," Capital Economics analyst Simona Gambarini said. "Uncertainty, volatility and geopolitical risk have been rising steadily since the start of the year." That has sparked good demand for gold through products such as bullion-backed exchange-traded funds, she said.

"Gold is benefiting from the risk-off sentiment, and because people are trying to hedge against worst-case scenarios." European stocks fell after two days of gains as tension over Syria and US sanctions drove Russia’s rouble to a two-year low, while concern about the prospect of a trade war boosted traditional safety plays at the expense of the dollar.

The US unit languished near a two-week low against a basket of currencies. Gold is often perceived as a safe store of value during times of political and financial uncertainty. Markets are also awaiting cues on the outlook for US monetary policy from consumer inflation data and minutes from the Federal Reserve’s March meeting, due later on Wednesday.

Tighter monetary policy raises the opportunity cost of holding nonyielding bullion.

Among other precious metals, silver was up 0.1% at $16.57/oz.

Platinum was 0.9% higher at $932.30/oz and palladium was up 0.6% at $958. The metal, just over 40% of which is produced in Russia, has bounced strongly this week as the sanctions against the country fed into a technically driven rebound after the first quarter’s 10% slide.

Although Russian output of the metal has not been directly affected, the sanctions have caused enough concern over supply in a market that has been in deficit for a decade to bring some speculative money back in, analysts said.

"With [sanctions target] UC Rusal owning 28% of Norilsk Nickel, a significant producer of platinum group metals, traders remain wary that supplies of the precious metal may also be impacted," ANZ said in a note.


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