Gold eked out a new six-month high of 1388.46 in overseas trading on Monday, but then retreated as the situation on Crimea played out pretty much as expected. The market will now wait to see how Moscow reacts to the tepid sanctions that have been announced thus far.
The outcome of the referendum in Crimea came as no surprise to anyone: The predominantly Russia speaking population voted to succeed from Ukraine and join the Russian Federation. The EU and the U.S. immediately reiterated that they reject the validity of that referendum, and imposed sanctions that included asset freezes and travel bans on a small group of Russian and Ukrainian individuals.
While further sanctions may be forthcoming, as suggested, that seems a pretty tepid initial response by the west. The measures are symbolic, not of any magnitude that might give Russia pause.
The Russian parliament is expected to vote, perhaps as soon as this week, on Crimea's petition to join the Russian Federation as a new subject with the status of a republic. Such a vote would likely result in broader sanctions, but it sure seems like the west is ceding that Crimea is gone.
With Russian speaking citizens in eastern Ukraine already agitating, and Russian troops already massing on the Ukrainian border, the situation remains extremely volatile. One might imagine that the west would have to respond much more aggressively if Russia moved into eastern Ukraine.
In the meantime though, the market seems to have turned its attention to the two-day FOMC meeting that begins tomorrow. This will be the first meeting presided over by new Fed chair Janet Yellen. The Fed is widely expected to hold steady on policy, and reduce asset purchases by an additional $10 bln per month.
Ukraine is among top 50 world gold holders - Published time: May 29, 2013 RIA Novosti / Pavel Lisitsyn
Ukraine’s gold reserves are estimated at more than 36.1 tonnes, according to the national bank, and is ranked 47 in world standings.
In March Ukraine was 51 according to the World Gold Council.
For the second consecutive year Ukraine is trying to diversify its international reserves and is actively buying gold on both foreign and domestic markets. However the price is turbulent and experts argue, whether the Central Bank should join in the rush or wait until the price settles.
There have been reports Ukraine is going to start gold mining. Experts estimate Ukraine’s gold resources at 400 tons in the Carpathian Mountains and 500 tons in the Donbass region. Some gold is also believed to be in the Crimea and Dnepropetrovsk regions.
Right now Ukraine has no gold production of its own and buys around 5 tonnes of gold a year. Domestic production of gold could start this year, the deputy head of National Bank, Vera Rychakovskya said. In three to five years Ukraine is expected to produce at least one ton of gold domestically and gradually increase capacity which will allow to cut imports by a third.
Ukraine’s Gold Reserves Secretely Flown Out and Confiscated by the New York Federal Reserve?
The Spoils of War and Regime Change
By Prof Michel Chossudovsky Global Research, March 14, 2014
Rothschild Bankers Are Pulled In Russia, Ireland, Iceland, China, Iran, & Hungary -
China Executes Bankers
Rothschild Bankers Who Screwed Everyone In Ireland Are Finally On Trial: Ireland Joins Iceland, Egypt, Russia, Hungary, China, & Iran FEBRUARY 13, 2014 BY VOLUBRJOTR
Gold surged to another six month high on Friday of 1387.87, before prices moderated intraday. The impending Crimean referendum this weekend has ratcheted geopolitical tensions steadily higher. Some U.S. data weakness offered an additional boost to the yellow metal initially.
U.S. Secretary of State, John Kerry, and Russian Foreign Minister, Sergey Lavrov met in London today in hopes of diffusing the situation. According to a USAToday report, while Kerry called the meeting "constructive", he made it clear that 'Moscow will not back down from support for a referendum Sunday in the Crimea that could separate the region from Ukraine and link it to Russia.'
Kerry had previously given Russia a Monday deadline to reverse course on the Crimea annexation. That's the day after the referendum, and I seriously doubt Russia would seek to deescalate once a pro-Russian vote has been cast. Things are likely to get even hotter in the days and weeks ahead as the west will be forced to follow-through on threats of sanctions, and Russia will likely retaliate, perhaps by cutting off gas supplies to Europe.
U.S. PPI fell by 0.1% in February, below expectations of +0.2%. The annual pace of producer price inflation slowed further to 0.9%, from 1.2% y/y in January. Core PPI fell 0.2% m/m and slowed to 1.1% y/y, from 1.3% y/y in January.
While the Fed is widely expected to stay the course on tapering when the FOMC meets next week, this latest bit of data is going to keep them worried about negative price risks. The Fed has historically viewed deflation as a far more troubling than inflation, so at some point it may be cause to pause.
The University of Michigan consumer sentiment index fell to 79.9 in March, below expectations of 81.8, versus 81.6 in February. While still well above the low from October of 73.2, the loss of momentum since the first of the year is troubling. It may be attributable to weather disruptions, but then again it might be something more serious.
Despite the retreat from the intraday highs, gold appears poised for its sixth consecutive higher weekly close. That would make eleven higher weekly closes out of the last dozen. The technical picture remains strong, with the next key resistance level that everyone is watching clearly defined by the August high at 1433.85.