Gold rose to the highest since the middle of May amid escalating tension between the U.S. and the Syrian regime led by President Bashar al-Assad. Silver, platinum and palladium also advanced.
On the Comex division of the New York Mercantile, gold futures for December delivery rose to $1 420.00 per troy ounce at 14:53 GMT, up 1.93% on the day. The precious metal surged to $1 423.20 an ounce earlier in the day, the highest since the middle of May. The contract surged 0.38% on Monday, a third straight day of gains, and extended its weekly advance to 1.6% following Tuesday’s jump.
Gold surged on Tuesday and remained above the key $1 400 level as safe-haven buying kicked in following the escalating tension between the two countries and as U.S. senior officials stated that military forces are ready to launch missile attacks against Syria on as early as Thursday. Defense Secretary Chuck Hagel told the BBC the U.S. military is “ready to go” if Obama makes the order.
“We have moved assets in place to be able to fulfill and comply with whatever option the president wishes to take,” Hagel said during a trip to Brunei for the BBC. This comes after yesterday U.S. Secretary of State John Kerry said that there is “undeniable” evidence the Syrian regime led by President Bashar al-Assad used chemical weaponry against civilians in the Damascus suburbs last week. Assad denied responsibility and blamed rebels for staging the attacks.
Meanwhile, United Kingdom’s foreign secretary William Hague said his country is convinced that Assad’s regime was behind the attack and that an agreement was met with the U.S. and France for the need of a response.
Adam Klopfenstein, a senior market strategist at Archer Financial Services Inc. in Chicago, said for Bloomberg: “Syria is the new bullish barometer for gold. We are seeing renewed interest in gold.”
The precious metal was also supported recently following downbeat U.S. new homes sales and durable goods orders, which dampened speculations that the Federal Reserve will begin decelerating its Quantitative Easing program in as early as September.
The precious metal has rebounded 16% since falling to a 34-month low of $1 180.15 a troy ounce on June 28 but is still en route to cap a 12-year bull run after declining 16% so far this year. The metal slumped amid shifting expectations that the Federal Reserve will decelerate its monetary stimulus and bring it to an end by mid-2014. An exit from the stimulus program would hurt gold’s demand prospects as it is mainly used as a hedge against inflation, which tends to arise when central banks easy money supply.
Market players will be keeping a close eye on this week’s U.S. economic data to further gauge Quantitative Easing’s tapering prospects. Wednesday’s Pending Home Sales might have advanced by 0.1%. On Thursday, the Preliminary Revised GDP is likely to have grown by 2.3%, while consumer spending and core consumer spending (Personal Consumption Expenditures) probably surged by 1.8% and 0.8% in the second quarter respectively. Initial Jobless Claims probably fell by 1 000 in the week ending August 24. On Friday, Personal Income and Spending are expected to have advanced in July but at a slower pace than in June. Core PCE on monthly and annual basis likely rose in July and the Chicago PMI and Final University of Michigan Confidence are projected to have advanced in August as well.
Gold also drew support as the International Monetary Fund reported that recent central bank purchases of the metal offset some of the sales from ETPs. Russia and Kazakhstan increased their gold reserves for a tenth month in a row in July. Azerbaijan, Guatemala and the Kyrgyz Republic also expanded stocks in July.
This comes after the World Gold Council reported that global bar and coin sales rose by 78% to 507.6 tons in the second quarter compared to a year earlier as demand in India and China, the world’s top two consumers, more than doubled. Jewelry demand increased by 47% to 575.5 tons.
Sales of coins and bars will reach as much as 1 000 metric tons in the two countries by the end of the year as low prices and economic recovery spurred demand. China’s demand totaled 776.1 tons last year, while India consumed 864.2 tons, council data showed.
Elsewhere on the market, silver, platinum and palladium also advanced. Silver for December delivery surged by 2.24% to $24.595 an ounce at 14:49 GMT. Prices ranged between days high of $24.740, the highest since April 14, while days low was touched at $24.033. Platinum October futures traded at $1 545.25 an ounce, marking a 0.05% daily gain. The contract hit a five-month high of $1 555.95 per ounce earlier in the day, while days low was at $1 543.50 per ounce. Palladium for December delivery rose to $752.30, up 0.58% on the day. Prices ranged between days high and low of $753.80 and $747.10 per troy ounce respectively.
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