Gold trades near 4-month high as Ukraine tension lifts havens

[MANCHESTER] Gold traded near the highest since November, amid renewed investor demand as geopolitical tensions persist over Ukraine.

Bullion edged slightly lower on Monday as the dollar strengthened. On Friday, it gained the most in almost four months after the US said it believed Russia could soon take offensive military action or attempt to spark a conflict inside Ukraine.

Russia has repeatedly denied it plans to invade its neighbor and Kremlin officials have accused the US of stoking "hysteria".

US National Security Advisor Jake Sullivan told CNN on Sunday there's "a distinct possibility that there will be major military action very soon" in Ukraine. The Russia-Ukraine tensions are bringing investors back to gold despite growing expectations the Federal Reserve will aggressively raise rates to curb the hottest inflation in four decades. Exchange-traded funds have recorded inflows for four weeks straight; hedge funds trading the Comex also boosted their bullish bets in the week through Tuesday.

"If the situation there does indeed escalate, the gold price is initially likely to climb further," Daniel Briesemann, an analyst at Commerzbank, wrote in a note. "Any further escalation of the situation will deter the Fed from raising interest rates by 50 basis points in March, as this could spark excessive turmoil on the financial markets." Spot gold edged down 0.2 per cent to US$1,855.02 an ounce just before 1 pm in London after surging 1.8 per cent on Friday, the most since Oct 13. The Bloomberg Dollar Spot Index rose 0.02 per cent, while silver advanced and platinum retreated.

Palladium rose as much as 3.9 per cent to US$2,398.25 an ounce, the highest intraday level since Feb 2, before trading little changed. Russia is the world's top supplier of the metal, which is used in catalytic converters.

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