Gold futures hover near the highest level in six months on haven demand

Gold traded near the highest level in six months after it rose for a sixth straight week, the longest winning stretch in more than 2-1/2 years, as Sundays referendum in Crimea fueled concerns of further escalation of tension, boosting demand as a store of value. Assets in the biggest bullion-backed ETP rose to the highest in three months.

On the Comex division of the New York Mercantile Exchange, gold futures for settlement in April traded at $1 381.50 per troy ounce at 8:50 GMT, up 0.18% on the day. Prices shifted in a daily range between $1 392.60 an ounce, the highest level since September 9, and $1 379.40. The contract rose 0.8% on Friday to settle the week at $1 383.20 per troy ounce, marking a sixth consecutive weekly advance, the longest winning run since August 2011.

The yellow metal extended its upward movement, despite Feds intentions to continue trimming its Quantitative Easing program, as a likely deep freeze in relations between Russia and the West spurred demand for it as a store of value.

The US and European Union warned Moscow not to annex Crimea after yesterday’s referendum, according to which 95.5% percent of voters backed the pro-Russian local government’s decision to separate from Ukraine and join Russia. While the United States, European Union and the Ukrainian government deemed the referendum illegal, Russia said it was in consonance with international law.

President Barack Obama authorized Treasury Secretary Jacob J. Lew to impose financial sanctions which may include freezing assets or prohibiting American companies or individuals from doing business with people or entities who threaten Ukraine’s security.

Sun Yonggang, a macroeconomic strategist at Everbright Futures Co., said, cited by Bloomberg: “Geopolitical tension has propelled gold higher, with CFTC and ETF positioning showing that investors have turned more positive on gold. Gold’s advance this week may be limited by the Fed, which is expected to continue to cut bond buying.”

Assets in the SPDR Gold Trust, the biggest bullion-backed ETP, expanded to 816.59 tons on Friday, the highest level since December 20th. Holdings in the fund are up 0.9% this year after it lost 41% of its assets in 2013 that wiped almost $42 billion in value. A total of 553 tons has been withdrawn last year.

According to data compiled by Bloomberg, total assets in bullion-backed ETPs jumped for a third week to 1 766.4 tons, the highest level since December 27th.

Data by the U.S. Commodity Futures Trading Commission showed that the net-long positions in gold, or bets that prices will rise, jumped by 4% to a 3-1/2-month high of 123 007 futures and options combined in the week ended March 11th, while short positions slid to 21 073, the lowest since October.

Market players are now awaiting the outcome of FOMC’s two-day meeting which starts on Tuesday for signs of where the US economy will head. Policymakers are expected to stick to the central bank’s earlier decision for a monthly reduction of its monetary stimulus by $10 billion.

Data last week showed that the number of people who filed for initial unemployment benefits in the US during the week ended March 8th fell to 315 000, defying analysts’ projections. Economists had expected a jump to 330 000, while the preceding period’s reading was revised up by 1 000 to show 324 000.

A separate report by the Commerce Department showed that retail sales jumped by 0.3% in February, beating analysts’ forecasts for a 0.2% growth after January’s downward-revised 0.6% contraction. Nine out of thirteen major categories marked gains.

Meanwhile, the Thomson Reuters/University of Michigan preliminary index of sentiment unexpectedly slid to a four-month low of 79.9 in March, down from February’s final reading of 81.6, confounding analysts’ expectations for a jump to 82.0. The survey showed that consumers were more pessimistic about the economy, suggesting household spending might accelerate slower than expected after the recent harsh winter weather.

Federal Reserve Chair Janet Yellen said last month that central bank officials were “open to reconsidering” the pace of reductions in monthly bond purchases, should the economy falter, in contrast with her comments made earlier in February that US economy has gained enough strength in order to withstand the reduction of monetary stimulus.