Gold Up on Escalating Ukraine, Russia Tensions

December Comex Gold futures rose close to 1 percent on Thursday as tensions between Ukraine and Russia fueled speculative buying and triggered sell stops. Reports of fighting along the Ukraine-Russia border also helped to underpin the market.

The news also triggered sell-offs in the U.S. and European stock markets. This encouraged investors to move money into gold after taking profits in the stock market. The next move in gold will be determined by whether the situation in Ukraine escalates, or investors continue to focus on a possible interest rate hike by the Fed in 2015.

Oversold conditions and speculative bottom-pickers helped boost October Crude Oil on Thursday. Yesterday’s surprise drawdown in crude oil stocks is also helping to trigger a positive response. On Wednesday, the U.S. Energy Information Administration’s weekly supply/demand report showed a drawdown of 2.1 million barrels for the week-ended August 22. Traders had priced in an increase of 1.1 million barrels.  

Tension between Ukraine and Russia also helped drive the EUR/USD lower. Traders sold the Euro on the thought that the continuing threats by Russia will lead to additional sanctions from the West. This could help weaken the already fragile Euro Zone economy. Also helping to weaken the Euro was the German Preliminary CPI report. This report showed 0.0% growth which was in line with expectations, but nonetheless, a sign of weakness.

Along with the Euro, the British Pound also traded weaker. The Ukraine situation was the primary catalyst behind the weakness, but traders also reacted to U.S. economic news. U.S. Preliminary GDP showed growth of 4.2%. This beat the 3.9% estimate. Pending Home Sales also posted a better-than-expected gain at 3.3%. This was well-above the estimate of 0.6%.

The big story of the day is the escalating tension between Ukraine and Russia; however, the positive U.S. economic news did help put a lid on gold, the Euro and the British Pound.

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