March 14, 2014 / 2:37 AM / 4 years ago

PRECIOUS-Gold hits fresh six-month highs on Ukraine, China worries

* Gold headed for sixth straight weekly gain
    * Asian stocks lower, yen gains
    * Chinese prices at discount; physical demand slow

 (Updates prices)
    By A. Ananthalakshmi
    SINGAPORE, March 14 (Reuters) - Gold rose to fresh six-month
highs on Friday and was headed for its biggest weekly gain in
four weeks, buoyed by mounting tensions between Russia and the
West over Ukraine, and worries over an economic slowdown in
    The metal has gained over 2 percent this week, marking its
sixth straight weekly rise, as investors exited riskier assets
such as equities. 
    While money flowing into gold-backed exchange-traded funds
has increased, reflecting confidence in the metal's outlook,
physical demand has quietened as higher prices put off buyers -
making some cautious about how long the rally can last.
    "While gold's push higher is attracting greater investment
demand, higher prices may be cooling emerging market physical
appetite," HSBC analysts said in a note.
    "Gold will face increasingly stiff resistance on further
rallies and will likely need a stronger euro to move
significantly higher. A decrease in China's physical demand for
gold - even if only a temporary one - could undermine rallies."
    Spot gold was flat at $1,368.86 an ounce by 0729 GMT,
after earlier hitting a fresh six-month high of $1,376.02. The
metal is up 14 percent so far this year.
    Demand in China, the world's biggest bullion consumer, has
fallen off with prices in Shanghai at a discount to spot prices.
Prices on the Shanghai Gold Exchange were about $4 an ounce
lower than London prices, compared with premiums of over $20
earlier this year.
    Physical buying in other Asian regions has also slowed, with
some selling to make a profit from rising prices. 
    Gold is getting its biggest support from the crisis in
Ukraine, which has caused the biggest stand-off between Russia
and the West since the Cold War.
    Russia launched new military exercises near its border with
Ukraine on Thursday, showing no sign of backing down on plans to
annex its neighbour's Crimea region despite a stronger than
expected drive for sanctions from the EU and United States. 
    German Chancellor Angela Merkel warned of "catastrophe"
unless Russia changes course. 
    Data on Thursday showed China's economy slowed markedly in
the first two months of the year, with growth in investment,
retail sales and factory output all falling to multi-year lows.
    The global uncertainties sent investors lapping up gold,
with holdings in SPDR Gold Trust - the world's largest
gold-backed exchange-traded fund - rising 2.10 tonnes to 813.30
tonnes on Thursday. 
    PRICES AT 0729 GMT
 Metal            Last       Change    Pct chg
 Spot gold          1368.86     -1.13      -0.08
 Spot silver          21.19      0.06       0.28
 Spot platinum      1471.24     -0.26      -0.02
 Spot palladium      775.25      2.25       0.29
 Comex gold          1369.6      -2.8       -0.2
 Comex silver        21.215     0.017       0.08
 Euro                1.3858                     
 DXY                 79.659                     
 COMEX gold and silver contracts show the most
 active months
 (Reporting by A. Ananthalakshmi; Editing by Ed Davies and
Richard Pullin)
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