Gold rebounded to new two-week highs as geopolitical tensions between Ukraine and Russia continued to ratchet higher once again. A weaker dollar provided additional support to the yellow metal.
Pro-Russian protesters have been agitating and taking over government buildings in Eastern-Ukraine. They are calling for Russia to intervene — as they did in Crimea — and Russian troops are already massed on the border.
Secretary of State John Kerry bluntly accused Russia of creating a pretext for invasion, saying that it “is clear that Russian special forces and agents have been the catalysts behind the chaos of the last 24 hours.” Kerry said, “What we see from Russia is an illegal and illegitimate effort to destabilise a sovereign state.”
Kerry went on to threaten Russia with “21st century tools to hold Russia accountable for 19th century behavior.” I suspect the tools he’s referring to are more sanctions; hit em in the wallet…
The BoJ held steady on policy today, in line with expectations. However, BoJ governor Kuroda dismissed the need to additional stimulus. This flies in the face of market expectations, which suggest that the BoJ could significantly increase both ETF and bond purchases over the summer.
We’ll have to wait and see how the Japanese economy responds to the sales tax increase that went into effect April 1, but I would tend to agree with the Bloomberg survey cited yesterday; that more asset purchases will be forthcoming.
Nonetheless, the yen jumped to a seven-session high against the dollar. This, combined with this week’s efforts by ECB officials to downplay the prospect of QE from Europe’s central bank, has weighed on the dollar. The dollar index fell to a two-week low, lending further support to gold.
U.S. stocks seem to have found some support today, but after two consecutive sessions of significant losses, equity investors may be a little rattled. Portfolio adjustments associated with diminished risk appetite may be helping the gold market as well.