GOLD ended slightly higher today alongside firmer equity markets, as traders divided attention between Japan’s nuclear crisis and political instability in the Middle East.
The most actively traded contract, for April delivery, settled up 0.6 per cent, or $US8.10, at $US1404.20 per troy ounce on the Comex division of the New York Mercantile Exchange.
Traders remain transfixed by developments at Japan’s Fukushima Daiichi nuclear complex, which was damaged by a 9.0 magnitude earthquake and tsunami a week ago.
Authorities are fighting to keep three damaged reactors at the facility from overheating and releasing dangerous amounts of radiation. In the latest efforts, water cannons and helicopters dumped water on a store facility, where spent nuclear fuel had been smouldering.
Gold traders also watched political developments in the Middle East.
Bahrain arrested several opposition leaders as the government grappled with a recent uprising, while in Libya forces loyal to Colonel Muammar Gaddafi performed air strikes on the opposition stronghold of Benghazi. The UN Security Council is set to vote on a resolution authorising air strikes on Libya later today.
“You’ve got one eye on Japan and one eye on the Middle East at the moment,” said Frank Lesh, futures analyst with FuturePath Trading.
Stronger equity markets gave gold prices a boost, with the Dow Jones Industrial Average was recently up 1.1 per cent, or 130.6 points higher, at 11,743.90. Firmer equities eased speculative selling pressure on gold, which had depressed gold prices in recent sessions as traders scrambled to cover losses in other markets by selling the precious metal.
Gold is typically considered a safe haven amid uncertainty, but as the world’s third-largest economy faces the unprecedented event of a nuclear meltdown even this long-established relationship has shown strain.
“This was also the case during the financial crisis in 2008, when gold sharply retreated parallel to equities and other assets. Investors currently appear to be still selling gold to raise cash and cover margin calls,” analysts at Deutsche Bank said in a note to clients.
But gold bugs drew some support from slightly higher inflation rates in the US as consumer prices rose at their fastest pace in February since mid-2009.
Gold is considered a hedge against inflation risk, and gold prices tend to keep in step with consumer price increases.
The seasonally adjusted consumer price index increased by 0.5 per cent from January, but underlying inflation, which excluded volatile food and energy prices and is considered a better measure of price trends, rose by 0.2 per cent.
(Source: http://www.resourceintelligence.net/gold-price-settles-back-above-us1400/16599)
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