Gold Continues to Climb on Ukraine Concerns

April Comex Gold finished sharply higher on Friday as investors added to their long positions ahead of the week-end. Speculative and hedge buying continued as investors bet the conflict between Ukraine and Russia would escalate over the week-end.

Last night Russia increased its presence along the Ukraine border as troops engaged in war games. This week-end Crimean citizens will vote on a referendum that may lead to Crimea’s secession from Ukraine. Equity investors are definitely nervous about the situation in Ukraine and are taking risk off ahead of the week-end while moving money into the safety of gold and U.S. Treasury instruments.

Short-covering and position squaring ahead of the week-end helped boost May Crude Oil futures. The market dropped significantly this week after the U.S. sold oil from its strategic reserve. Since this event was tipped to refiners, it looks as if it was already priced into the market, leading to the current two-day technical bounce.

Oversold conditions and speculative buying ahead of the Crimean vote this week-end also helped underpin the market. Bullish speculators are betting the situation in Ukraine escalates enough to disrupt the oil supply in the region.

The EUR/USD finished higher. On Thursday, the market posted a potentially bearish closing price reversal top. However, there was no follow-through break today so the chart pattern was not confirmed.

The fundamentals are mixed at this time. This morning’s weaker-than-expected U.S. Producer Price Index report helped underpin the Euro against the dollar, however, bullish traders are still concerned the European Central Bank may take action at its next meeting to weaken its currency. Although free market conditions have been driving the EUR/USD toward the psychological 1.4000 level, the ECB fears an overpriced currency will hurt exports and thus slow down the Euro Zone’s economic recovery.

The GBP/USD traded lower after the release of disappointing U.K. trade balance data. Losses were limited, however, by the weaker-than-expected U.S. producer inflation report. The official U.K. data showed the trade deficit widened to 9.79 billion pounds in January, from 7.66 billion in December. Also contributing to the weakness was general nervousness over the situation in Ukraine.