Gold Falls As Traders Move To The US Dollar For Safe Haven

Gold took a hit on Monday and continues to decline this morning trading at 1281.60 down by $5.80 while silver gave up 24 pips to reach 19.468 and platinum fell $2.85 to reach 1422.45. There is a lack of demand for safe haven assets sending precious metals to September lows while the safe haven yen declined against the euro and the dollar. The USDJPY is trading at 104.82 and the EURJPY climbed to 137.52. Gold prices remained steady below $1,300 an ounce as investors eyed heightened tensions in Ukraine and awaited U.S. economic data. Safe-haven demand in gold has been subdued, despite the recent worsening of the Ukraine crisis, due to strength in the dollar and equities. Gold fell to its lowest level in nearly a week on Tuesday as a stronger dollar outweighed any safe-haven demand from lower equities and heightened tensions over Ukraine. On the geo-political front, Ukrainian President Petro Poroshenko accused Russia on Monday of “direct and undisguised aggression” which he said had radically changed the battlefield balance as Kiev’s forces suffered a further reverse in their war with pro-Moscow separatists.

The dollar strength ahead of the this week’s European Central Bank policy meet and US non-farm payrolls data has precious metals traders worried that gold could fall to lower levels in the next few sessions.  With the U.S. market shut on Monday for the Labor Day holiday, it was a quiet day on the commodities markets. While geopolitical concerns have increased the appeal of gold to risk adverse investors, the stronger dollar made the metal effectively more expensive.

Holdings in SPDR Gold Trust, the world’s top gold-backed exchange traded fund, have been falling recently while physical demand is also quiet.

Palladium hovered near a 13-1/2 year high on fears that possible Western sanctions on Russia could hit supply, while silver tracked gold lower as the dollar hit a seven-month peak against the yen and held near a one-year high against the euro.

Industrial metals are on the positive side as palladium got a boost from the Ukraine crisis as investors fear fresh Western sanctions on Russia could include producers of palladium, which is used in auto catalysts. Russia accounts for over 40 per cent of global palladium supply. Palladium rose 0.1 per cent to 904.50 – a fifth straight session of gains. The metal climbed as high as 910 on Monday, its highest since 2001, before paring some gains to close up 0.5 per cent. Copper also gained this morning adding 6 points to trade at 3.157 after tumbling at the end of the month. Strong US has continued to support the metal family. Copper prices fell on Monday, under pressure as weak factory data from China raised concerns about the outlook for demand from the world’s top metals consumer. Volumes were subdued as markets in the United States were shut for the Labor Day holiday. Growth in China’s vast factory sector slackened in August as foreign and domestic demand slowed, stoking speculation that further policy easing would be needed to prevent the economy from stumbling once more. China is the world’s largest copper consumer, accounting for as much as 40 percent of global demand.