As last week's concerns of a direct military confrontation between Russia and Ukraine have subsided, gold prices fell on Monday. This left the precious metal vulnerable to fears of higher interest rates in the U.S. Gold prices also came under pressure from an improved risk appetite in the market place and by the recently stronger U.S. dollar.
Ukrainian fears ease
On the Comex division of the New York Mercantile Exchange, gold for December delivery, the most actively traded contract, traded lower by $6.90, or 0.5 percent, at $1,299.30 an ounce.
News released on Friday by Ukrainian officials sent gold prices climbing on worries that the two countries were heading toward a military escalation. Officials had announced that the country's army had partially destroyed a column of Russian military vehicles that had entered its territory. Many investors see times of geopolitical or economic uncertainty as an opportunity to buy gold, as they believe the metal will hold its value better than other assets, reports The Wall Street Journal.
"The only real catalyst to own gold right now is geopolitical tension," said Frank Lesh, a broker at FuturePath Investments, according to The Wall Street Journal. "Without that factor in play, why own it?"
However, once Monday rolled around there was almost no evidence left that the conflict would escalate. Moscow even referred to the reports of the battle as "some kind of fantasy," reports The Wall Street Journal. Some Western Officials pointed out that military equipment was believed to have been continuously imported over the border to pro-Russia separatists for weeks.
According to Forbes, the gold bulls' next upside near-term price breakout objective is to close at the high from August of $1,324.30 above solid technical resistance. Bears' next near-term downside breakout price objective is closing prices below solid technical support at the August low of $1,281.00.
First resistance is expected at Monday's high of $1,304.90 and then at $1,310.00. First support is seen at Monday's low of $1,296.50 and then at last week's low of $1,293.00.
The London P.M. gold fix was $1,296.75 compared to the previous P.M. fixing of $1,302.75.
Stronger U.S. dollar and rising stocks send gold lower
Investors have begun to think twice about buying gold, as it has been weakening as result of worries of tightening monetary policy in the U.S. Higher interest rates are viewed by most investors as a negative influence for the precious metal, for it's a risky investment to hold and struggles to compete with yield-bearing investments, reports the Wall Street Journal.
A stronger dollar and rising stocks also detracted from gold's appeal. Consistently falling U.S. Treasury yields and record-low German bond yields show that increasing investor and trader uncertainty in the market place still remains.
At the Multi Commodity Exchange, gold for October delivery moved up by Rs 17, or 0.06 percent, to Rs 28,311 per 10 grams in a business turnover of 265 lots, reports the Business Standard.
According to Forbes, traders and investors are currently awaiting Thursday's annual Kansas City Federal Reserve meeting in Jackson Hole, Wyoming. Fed Chair Janet Yellen and ECB President Mario Draghi are scheduled to speak . This gathering of world central bankers has previously resulted in crucial U.S. monetary policy speeches and hints at where monetary policy is headed.
Meanwhile, Bloomberg reports that palladium futures were up to a 13-year high on concern that global supplies will exacerbate a deficit after falling behind the demand for the metal used in pollution-control devices in cars. Palladium for September delivery closed at its highest price since Feb, 21, 2011 at $894.90 a troy ounce.
December Comex silver last traded higher $0.10 at $19.69 an ounce.
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