Are Events in Ukraine Driving Gold?

March 3, 2014 | By | Reply More

On Monday, early morning Asian trading saw gold reach a smidgen off $1350 an oz., the highest level since end October 2013. Fridays’ release of data from the Commodities Futures Trading Commission saw net longs at 113,911 contracts, up 20% from the previous week indicating that the recent increase in bullish sentiment is becoming sustained.

At the same time several analysts are have been raising their forward price forecasts for the yellow metal and that China will continue to be the worlds’ number one importer and hoarder.

The question is how much is this improving market performance being driven by the deteriorating events in the Ukraine?

Golds’ 2013 Swoon Is Behind Us

Our judgement is that gold has put away its poor showing in 2013 and, with the exception of a very short lived spike in Asian trading this morning, is continuing to show the slow but steady progress it started this January.

Its next step is to break through and hold above the psychological barrier at $1350 an oz. Maybe the Ukraine situation will provide the catalyst, with $1415 an oz being the next resistance level to overcome.

Gold Holding ETFs Need to Reassure Investors

We note also that Bullion Vault, the largest 24/7 online gold and silver bullion dealing site, recorded its busiest Sunday since last August, when the Syrian crisis was thought to have caused a rally.

It seems that the appetite for physical gold is shared by many Western retail investors as well as their Asian counterparts. What a pity then that the distrust in ETFs that claim to hold physical gold on behalf of their share holders has not abated.

We have gone over the reasons in previous articles but it is significant that GLD, the biggest of all, and others have done nothing to reassure their investors that their holdings are not just paper promises for gold that may have been lent out several times over.

The sooner they address that area of concern then the sooner trust in the form of money flows  into gold holding ETF to the benefit of golds price, the better.

The Gold Manipulation Question

There is another area of concern that is developing. That is the question of the daily London gold fix and whether the six major banks are responsible for any artificial manipulation of the price.

It is expected that an investigation will take place, nor would it surprise us that the question of supply and demand has not been met and that either succumbing to pressure from the Fed and its like in Europe who want to keep the gold price down, or whether it may be that their own traditional dislike of gold has led them from the path of honesty to self interest remains to be determined.

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