Spot gold advanced on Tuesday on concerns that tension in Ukraine was about to escalate. But analysts warn that it’s too early to expect a bullish market for the precious metal.
Gold for immediate delivery gained 1.2% to $1,312 for every ounce as of 11:00 am in London. The commodity stood at $1,296 on the evening of Monday.
The rise was witnessed after gold gained above its 200-day moving average on Friday, a critical measure analysts utilize to asses long term performance of an asset of a particular class, as CNBC reports.
Gold comes in handy as a safe haven when geopolitics and other factors cause market volatility. Thus, the commodity picked up the same role on Tuesday as tensions heat up again after Russia annexed Crimea last month.
Ukrainian authorities have put around 70 people in custody in eastern city Kharkiv after government buildings were taken over in pro-Russian protests. The events follow on-going demonstrations in the region, which have sparked fears that Moscow could intervene directly and provoke more damaging economic punishment from the West.
Naeem Aslam, Avatrade’s top market analyst believes that gold is yet again following geopolitical events. The metal rose in the middle of March when the Ukraine-Russia crisis began. He says escalation of the Ukraine crisis could push gold prices higher, although markets would need to break through the $1,400 ceiling before an optimistic upward trend can be confirmed.
“I don’t believe we have a bull market on our hands but neither do I believe the doom mongers who think that we’re heading down to levels around $1,000 an ounce,” Michael Hewson of CMC Markets agreed.
Bloomberg attributes the surge in gold prices partly to a weak dollar.
The product is up 8.8% so far in 2014, buoyed by events in Ukraine lately. However, its latest surge took place without relying on demand from two of gold’s traditional markets, China and India.
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