Gold jumped to a new three-week high of 1329.87 in overseas trading, amid rising geopolitical tensions between Russia and Ukraine. Fresh threats by the ECB to halt the rising euro via easier policy is also helping to support the yellow metal.
Pro-Russian protesters that are occupying government buildings in Slaviansk have ignored the Ukrainian governments deadline to vacate. The government has threatened to remove them by force, and the protesters have called on Russia to intervene on their behalf. Russian president Putin has expressed “concern” about the situation. With Russian troops massed near the Ukrainian border, there remains considerable tension that those concerns might illicit action.
Breaking: Russian fighter jet buzzes U.S. Navy destroyer in Black Sea: Ship commanders considered the actions provocative…
Months of jawboning and no action by the ECB has precipitated an uncomfortable rise in the euro, which has exacerbated deflationary pressures. ECB president Draghi warned over the weekend that a further rise in the single currency would trigger a policy response. “A strengthening of the exchange rate requires further monetary stimulus. That is an important dimension for our price stability,” said Mr. Draghi.
Time will tell if this nothing more than more talk, or if ECB action is at hand. The Euro slipped modestly against the dollar, but the market is probably going to want to test the ECB’s resolve and find the point where the central bank will stop talking, and actually act.
Despite the firmer dollar, stemming from pullback in the euro, gold remains well bid. Nearly 50% of the recent drop in the gold price from 1387.87 (14-Mar high) to 1277.00 01-Apr low) has already been retraced. There have been two consecutive higher weekly closes as well.
Recent volatility in the stock market may be another contributing factor to the rebound in gold. A risk-off environment typically increases the appeal of safe-haven assets such as gold. But before you roll your equities into some paper gold product, be sure to read Alasdair Macleod’s latest article entitled Gold and bail-ins.
Macleod worries that “anyone with an unallocated gold account is at risk.” So, buy physical gold and take possession. We here at USAGOLD would be happy to answer any questions you might have about that process.