Gold Eases Along With Tensions

Gold eased by just under $12.00 in the morning session as traders began to focus on the Federal Reserve monetary policy meeting which will end with Janet Yellen’s press conference at 1400 GMT tomorrow. Wall Street rallied on Monday, with the Dow industrials rebounding after a five-day losing streak, as voting in Crimea passed without violence and after economic reports had U.S. manufacturing output jumping the most in six months in February. Asian equity markets rose on Tuesday, stabilizing after recent volatility, as the implementation of sanctions on Russia lifted global risk appetite.

Concerns about the Chinese economy that dogged markets in January reappeared during the week. Stocks fell in morning trading Monday following news over the weekend that Chinese exports had fallen sharply in February, although some experts cautioned that a long Lunar New Year holiday might deserve part of the blame. On Thursday, however, stocks fell sharply on evidence that more fundamental factors might be at work, as data showed that Chinese industrial production declined in January and February. Investors were also disappointed by remarks from Chinese Premier Li Keqiang, who appeared to indicate that officials were willing to tolerate growth that falls short of their 7.5% gross domestic product growth target and would not respond with stimulus measures. Another major factor weighing on markets was the crisis in Ukraine, which seemed to intensify as the week progressed. Investors became particularly nervous about the apparent massing of Russian troops near the Russia-Ukraine border, as well as German Chancellor Angela Merkel’s statement that Russia would face “massive” political and economic consequences if it did not enter into serious negotiations to de-escalate the situation.

Gold prices fell more than 1% on Monday, the biggest one-day drop since late January, as a sharp rally in US equities triggered profit taking after bullion briefly rose to a six-month high earlier in the day. Silver is taking cues from gold falling 167 points to trade at 21.108.

Copper continued to recover gaining 32 points to trade at 2.982. London copper rose to a one-week high on Tuesday as risk assets gained favor on a slight easing of tensions over Crimea, forcing covering of short positions.

But some copper users said they were holding off fresh orders, suggesting the price gains may not sustain. Copper prices were battered to three-and-a-half-year lows last week by fears that a domestic bond default in China could flag more deeply rooted-problems that could cause copper financing deals to unravel. China is the world’s top user of copper, with at least half of its monthly imports seen feeding financing demand, where importers sell copper to domestic markets to raise capital for investment in higher-yielding assets such as real estate. Palladium eased a bit to 772.90 along with platinum to trade at 1463.30.