Gold futures hold above $1 300 as tensions in Ukraine trigger safe-haven demand

God futures traded above $1 300 per troy ounce on Tuesday as geopolitical tensions in Ukraine increased the safe-haven appeal of the precious metal. Assets in the SPDR Gold Trust, the biggest bullion-backed ETF, were unchanged yesterday after falling to the weakest level in almost a month on April 4.

On the Comex division of the New York Mercantile Exchange, gold futures for settlement in June surged by 0.75% to trade at $ 1 308.00 an ounce by 06:52 GMT. Prices shifted in a daily range between $1 310.10 an ounce and $1 297.20 an ounce. The precious metal settled last week 0.6 percent higher, snapping two straight 5-day periods of declines.

Bullion has lost 3.1% in March as the US economy expanded at a faster-than-expected pace and after Federal Reserve Chair Janet Yellen said the central bank’s bond-buying program may be brought to an end this fall, with borrowing costs starting to rise by mid-2015. The Federal Reserve trimmed its monthly bond-buying program by $10 billion at the last three meetings.

However, the precious metal has climbed 8.1 percent this year, rebounding from the worst annual drop since 1981, as a rout in emerging markets and Russia’s annexation of Crimea boosted safe-haven demand.

Demand for the precious metal as a store of value continues to be lifted by simmering tensions between Russia and the West, in what turns out to be the worst conflict between the two parties since the end of the Cold War. Pro-Russian protesters gained control in one city and declared a separatist republic in another, in moves Kiev’s pro-European government described as a Russian plan to justify invasion in Ukraine and to dismember the country.

The US and the European Union have imposed sanctions, which include asset freezes and visa bans, on individuals closely tied to President Putin and are threatening broader economic penalties, if Moscow continues its course.

Britain asked its European partners last week to continue with the preparation of economic sanctions against Russia as a large portion of Russian troops remained amassed near Moscow’s border to Ukraine.

Fed stimulus outlook

Investors’ attention is now focused on the minutes from the March 18-19 Fed policy meeting, due to be released tommorrow. The Federal Open Market Committee, which cut monthly asset purchases by $10 billion at each of its past three meetings, is set to reconvene at the end of the month.

Gold prices drew support on Friday, after a government report showed US employers added less workers than expected, raising economic concerns and boosting demand for the metal as a store of value.

Employers in all sectors of the US economy, excluding the farming industry, added 192 000 new jobs in March, after a revised 197 000 gain in the precious month that was higher than previously reported. The median experts’ forecast called for 200 000 new payrolls to be added last month. Jobs creation is considered of utmost importance for consumer spending, which accounts for almost 70% of the US economy.

In 2013, the US added 194 000 payrolls each month on average, while in 2012 the jobs created were 186 000.

Bullion also drew support after Federal Reserve Chair Janet Yellen said last week that the central bank needed to do more to fight against unemployment, because keeping interest rates near zero for more than five years and swelling its balance sheet with asset purchases seemed not to be enough. She also added that the US economy still needed monetary stimulus for “some time” and that most of the Fed officials shared the same opinion.

Assets in the SPDR Gold Trust, the biggest bullion-backed ETP, were unchanged yesterday, after being reduced to 809.18 on April 4, the weakest level since March 7. Holdings in the fund are up approximately 1% 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.