GD: Gold Price Drops 3/4 of "Ukraine Crisis" Jump as Russia Moves to Ease Tensions
The GOLD PRICE fell hard Tuesday morning in London, losing three-quarters of Monday's 2.5% jump to 4-month highs above $1350 per ounce, as the Kremlin sought to ease tensions over Ukraine and world stock markets rallied.
First, at 6am London time, Moscow announced the end of military exercises suddenly called last week, and which were already scheduled to end late Monday.
Prices for large gold investment bars lost $10 per ounce inside 10 minutes.
President Putin then told his first press conference since the weekend crisis that sending Russian troops into the Ukraine would only be a "last resort".
The spot gold price fell again to $1332, a level first hit during this 2014 rebound last Monday.
"Financial market tension is melting away," says FX analyst Kit Juckes at Societe Generale, "[but] no, of course it's not 'all over'."
Ukraine's interim government in Kiev says 16,000 extra Russian troops have already crossed the border from Russia, adding to the 25,000 staff which Moscow is authorized to station in Sevastopol.
"The economic fallout," says Juckes, "notably in Russia, will be significant. But financial markets are short-sighted animals, and everything is calmer."
"Is it just me," asks Standard Bank FX strategist Steven Barrow, "or do major markets not respond to shock events with the same ferocity that they did in the past?"
Monday's 2% fall in European equity investment prices "hardly seems substantial in light of weekend events in the Ukraine," he adds. "Nor does the 2% rise in gold prices."
Tuesday morning saw most other financial markets reverse Monday's jumps, with gas and wheat prices falling with major-government bonds as stock markets bounced hard.
Gold trading volumes in US futures more than doubled yesterday from Friday, and gold options saw heavy demand for $1400 calls.
The giant SPDR Gold Trust (GLD) however added no metal to the investment gold backing its shares.
Closing before Putin's comments on Russian troops and Ukraine, bullion traded in Shanghai this morning finished the day some $2.80 per ounce below the London gold price.
Typically trading at a premium, gold already shipped to China – the world's No.1 consumer nation – went to a discount last Monday for the first time since November.
