Download Gold prices increase as the crisis in Ukraine

MAIN TOPICS
 Gold prices end the week back above
$1300/oz.
 US and EU impose sanctions on Russia.
 The crisis in Ukraine spirals out of
control.
 Latest US non-farm payrolls are the best
since Jan 2012.
05 May 2014
Gold prices received a boost on Friday ending flat overall on the week. Earlier in the week, prices slipped below the
$1300 an ounce level and traded around $1280 an ounce. Then, on Friday the price of gold rallied strongly despite
the latest solid non-farm payroll figure and mainly due to increasing geopolitical tensions in Ukraine.
Gold prices increase as the crisis in Ukraine escalates.
The US government announced that they will freeze the assets and impose visa bans on seven powerful Russians
close to President Vladimir Putin and also sanctioned 17 Russian companies in reprisal for Moscow's actions in
Ukraine. Among those sanctioned was Igor Sechin, head of state energy giant Rosneft.
The United States will deny export licenses for any high-technology items that could contribute to Russian military
capabilities and will revoke any existing export licenses that meet these conditions, the White House said.
After the announcement by the US government, Russia's armed forces chief of staff and its military intelligence chief
were among 15 people targeted by the European Union's latest sanctions over the Ukraine crisis.
General Valery Gerasimov, army chief and the country's deputy defence minister, were named in the EU's official list
along with Lieutenant-General Igor Sergun, director of Russia's GRU, or main intelligence directorate.
Another GRU officer, Igor Strelkov, was also placed on the list for "incidents in Slavyansk".
Several officials involved in the March annexation of Crimea by Russia were also listed along with Ukrainians held
responsible for trouble in the country's east, including "Donetsk Republic" leaders Denis Pushilin and Andriy Purgin.
The latest list brings to 48 the number of people to be hit by an EU asset freeze and travel over the annexation of
Crimea and unrest in eastern Ukraine.
Another 22, all Ukrainians, also have had their assets frozen in the 28-nation bloc because they are being
investigated for fraud and embezzlement by the interim Ukraine authorities.
Among those placed on the EU blacklist over the annexation of Crimea are two deputy state Duma chairpeople,
Sergei Neverov and Ludmila Shvetsova, as well as the acting governor of annexed Sevastopol, Sergei Menyailo and
deputy premier Dmitry Kozak, who oversaw Crimea's integration into the Russian federation.
Others listed over Crimea are Oleg Belaventsev, Oleg Savelyev and Olga Kovatidi.
Ukrainians targeted for separatist activities include German Prokopiv and Valeriy Bolotov, both allegedly involved in
the seizure of official buildings in Lugansk.
One of the leaders of the separatist People's Militia of Donbass, Sergiy Tsyplakov, was also named.
Violence broke out on Friday and more than thirty people were reported dead in a fire linked to riots in Ukraine port
of Odessa. Ukrainian authorities said 31 people died in the blaze at the city’s trade union building on Friday evening.
Twenty-three of the victims died of carbon monoxide poisoning and eight died after leaping from upper storey
windows to escape the flames, the Interior Ministry said in a statement.
In another separate event that also took place on Friday, pro-Russian rebels shot down two Ukrainian helicopters
near separatist-held Slaviansk, killing two crew members, while Moscow accused Kiev of wrecking hopes of peace by
launching a "criminal" assault to retake the eastern town.
Separatists said Ukrainian forces killed three of their fighters and two civilians when they moved in on Slaviansk in
the early hours, but that the troops had only taken five checkpoints from the rebels.
The West continues to accuse Moscow of provoking the unrest in eastern Ukraine, something Russia denies.
US President Barack Obama, at a meeting with German Chancellor Angela Merkel at the White House, warned of
further sanctions against Russia if it did not "change course".
He said the idea that the unrest was caused by a "spontaneous uprising" was "belied" by the militants' use of
missiles.
Ukraine's government has said the country is now "at war” with pro-Russia insurgents as the Kremlin warned that it
had received “thousands” of pleas for help from inside its neighbour.
As fighting raged around the town of Kramatorsk in the eastern region of Donetsk, Ukrainians took stock of the worst
bloodshed since the February Revolution.
So far, however, Ukraine’s army has not yet attempted a full scale assault to retake the town while Russia has
already amassed between 35,000 and 40,000 troops on Ukraine’s eastern frontier, stockpiling enough fuel,
ammunition and medical supplies – including a chain of field hospitals – for this army to be able to mount an
invasion within 12 hours of receiving the order.
John Kerry, the US secretary of state, spoke to his Russian counterpart, Sergei Lavrov, by telephone. The opposing
demands of the two men showed their totally opposing views of the crisis. Mr Kerry said that Russia must “withdraw
support for the separatists” and begin to “de-escalate the situation”.
Mr Lavrov, by contrast, said the burden of restoring calm rested on America. He urged Washington to restrain the
Kiev government and, in particular, force a halt to the military offensive in the east that was “pushing the country
towards a fratricidal conflict”.
Despite solid non-farm payrolls, gold prices rise.
Meanwhile, the all-important US employment data which was released on Friday, failed to put pressure on gold
prices. US job growth increased at its fastest pace in more than two years in April, suggesting a sharp rebound in
economic activity early in the second quarter. Non-farm payrolls saw the largest gain since January 2012 in April,
surging to 288,000 last month and beating Wall Street’s expectations for an increase of 210,000, the US Labour
Department said on Friday.
The unemployment rate dropped by 0.4% to a five-and-a-half-year low of 6.3%, part of the decline was because
hundreds of thousands of people left the labour force.
Overall, the solid report suggests that the economy is gathering momentum and will induce investors to pull forward
their bets on when the US Federal Reserve (US Fed) will raise interest rates.
US Treasury debt yields soared after the report, while the dollar jumped to session highs against the euro and the
yen.
Last Wednesday, the US Federal Reserve announced a further reduction of its economic stimulus efforts, after a twoday meeting in Washington.
The central bank said it would continue trimming its monthly bond-purchases by an additional $10bn (£5.9bn) to $45
billion.
The bank has been buying bonds to keep long-term interest rates low and stimulate economic activity.
Fed chair Janet Yellen said the bank will continue to support the US economy for as long as it deems necessary.
The Fed ignored the dismal first-quarter performance which showed that the US economy grew at an annual rate of
only 0.1% in the first quarter 2014.
For now it seems that the situation in Ukraine which is causing a stand-off between the US, Europe and Russia will
dominate the gold market. And, as I believe that tensions will escalate, I expect to see prices pushing higher.
TECHNICAL ANALYSIS
The price of gold has built solid support above $1280/oz. and Friday’s push back above the 200 day MA suggests
that prices may rise higher.
About the author: David Levenstein is an independent precious metals market commentator with more than 30 years’ experience.
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Information contained herein has been obtained from sources believed to be reliable, but its accuracy cannot be guaranteed.
Any opinions expressed herein reflect judgements at this date and are subject to change without notice.