Gold futures rose slightly on Tuesday as the conflict between Russia and Ukraine lowered confidence in the euro zone economy, while the possibility of a Russian aid convoy nearing the Ukraine could contribute to increasing tensions.
Gold has gained about 9 percent this year, primarily on concerns of turbulence between the West and Russia over Ukraine and violence in the Middle East. Riskier assets such as equities have made investors see the precious metal as a smart alternative investment.
Effects of Russia and Ukraine crisis
The ZEW think-tank reported the number of fall investors is at its lowest level since December 2012 and also said that economic sentiment in Germany was impacted by the rising concerns over the Ukraine crisis and how it might impact future business. This helped boost German Bund futures while pushing the euro lower, reports Reuters. The German ZEW economic expectations index was down to its eighth consecutive monthly decline at 8.6 in August from 27.1 in July.
However, due to evidenced not only by the steadier gold prices but also by a strengthening U.S. dollar and higher U.S. Treasury prices, some safe-haven demand continues to exist in the market place. The dollar index was up 0.2 percent on Tuesday as the euro faltered from the weak ZEW data.
December Comex gold increased by $3.20 at $1,312.50 an ounce while spot gold was last seen climbing $0.80 at $1,311.75, according to Forbes.
Andrey Kryuchenkov, an analyst at VTB Capital, said, "The market is range-bound below last week's highs, consolidating with some support from the ongoing geopolitical concerns over Ukraine and Iraq. The range is still quite narrow and the stronger greenback will limit the upside, also given relatively weak physical demand at the moment," he added. "The market will be monitoring developments in Ukraine as Russia sends an aid convoy," according to Reuters.
Sluggish demand in Asia
Aside from geopolitical factors, gold has had trouble finding support from Asia, the top consuming region of the precious metal.
Investors have trimmed positions in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund. The fund reported its most significant outflow since the beginning of May with a 5.36 ton drop in its holdings last week.
According to Forbes, the gold bulls' next upside near-term price breakout objective is to reach a close above solid technical resistance at $1,328.00. The bears' next near-term downside breakout price objective is to produce a close below solid technical support at the August low of $1,281.00. First resistance is forecasted at $1,315.00 and then at $1,320.00, while first support is seen at $1,306.80 and then at $1,300.00.
Expectations that the U.S. Federal Reserve will soon raise interest rates have been fueled by strengthening global economic data, increasing the opportunity cost of holding non-yielding bullion.
Other precious metals news
Meanwhile, silver increased by 0.3 percent at $20.06 an ounce. Silver prices are currently in a five-week-old decline on the daily bar chart, giving December silver futures bears the near-term technical advantage. Silver bulls' next upside price breakout objective is producing closing prices above solid technical resistance at $20.70 an ounce and the next downside price breakout objective is closing prices below solid technical support at $19.50. First resistance is seen at $20.25 and then at $20.35 while next support is expected at $20.00 and then $19.92, Monday's low, reports Forbes.
Palladium is nearing its most expensive level since the middle of 2002 after climbing to 13-1/2 year highs last month. According to Reuters, UBS said that the preference for palladium versus platinum is obvious this month after several months of consistent gains for both metals. However, August has shown a split in their flows.
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