Gold read to turn around?

Gold (COMEX:GCQ14) reached the highest price in three days in New York, after the first back-to-back weekly declines since May, as investors weighed unrest in Ukraine and the Middle East against signs of a stronger U.S. economy.

Bullion rose 8.7 percent this year, partly amid unrest in the regions. The U.S. said satellite photos show that Russian forces shelled across the border into Ukraine as the U.S. and Europe consider more sanctions against Russia. International pressure mounted on Israel to end its three-week offensive in the Hamas-controlled Gaza Strip.

Gold fell 28 percent last year on expectations for reduced U.S. stimulus. The dollar was little changed near a five-week high against a basket of 10 major currencies before U.S. reports expected to show this week the economic recovery is gaining momentum and as Federal Reserve policy makers start a two-day meeting tomorrow. The metal declined 0.4 percent last week.

“Gold is clearly in greater demand again as a safe haven” amid geopolitical concerns, analysts at Commerzbank AG wrote in a report today. “The latest price rises were doubtless attributable above all to short-term” traders, they said.

Gold for December delivery added 0.1 percent to $1,306.90 an ounce by 7:44 a.m. on the Comex in New York. It reached $1,311.40, the highest since July 23, rebounding from a five- week low of $1,289.40 set on July 24. Bullion for immediate delivery lost 0.1 percent to $1,305.35 in London, according to Bloomberg generic pricing.

Futures trading volume was 42 percent above the average for the past 100 days for this time of day, data compiled by Bloomberg show.

 

Military Offensive

Israel reduced the scope of its military offensive today, saying it wouldn’t initiate strikes. After holding its fire overnight, Israel shelled a site in northern Gaza in response to a rocket fired from there despite a Hamas truce call.

The Fed meets tomorrow to debate the pace of interest-rate increases and whether to reduce further bond purchases. Data may show today U.S. services expanded for a ninth month and reports due this week may show employers added more than 200,000 jobs for a sixth month, while economic growth rebounded last quarter.

“The market is looking to the dollar for direction,” Bernard Sin, the head of currency and metal trading at MKS (Switzerland) SA, a Geneva-based refiner, said today by phone. “On any dips below $1,300 an ounce, you’ll probably see some more physical demand out of Asia,” while investors are still focusing on tensions in the Middle East and Russia, he said.

Central banks from Russia to Kazakhstan to Mexico increased gold reserves in June as Germany trimmed its holdings, International Monetary Fund data show. Kyrgyzstan, Tajikistan, Serbia, Greece and Ecuador also showed higher gold reserves for the month, figures on the IMF website show.

Silver (COMEX:SIU14) for September delivery added 0.2 percent to $20.685 an ounce in New York. Platinum for October delivery gained 0.8 percent to $1,489.80 an ounce. Palladium for September delivery was 0.7 percent higher at $885.65 an ounce. It reached a 13-year high of $890 on July 17.

 

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