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Gold lower as Ukraine situation calms, Citi cool on silver

Last updated: 08:50 04 Mar 2014 EST, First published: 09:50 04 Mar 2014 EST

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Gold is currently matching the market’s mood over the situation in Ukraine and was lower as Russian military exercises in central and western Russia came to an end.

There had been speculation the exercises could be a precursor to an incursion into the east of Ukraine by the Russians, but in a press conference president Putin said there was no need “yet” to send more troops into the country.

The spot price spiked to more than US$1,350 yesterday following the Russian takeover of the Crimea province, but gave back most of those gains today following the Putin press conference.

Spot gold was about US$18 lower at US$1,332 ahead of the US open.

The events in the Ukraine this week have diverted attention away from another slew of important economic data due to be published.

The ADP private jobs number is due Wednesday, European interest rates on Thursday and US non-farm payrolls on Friday.

The US numbers in particular will be carefully scrutinised for the weather impact and any adjustments to the last two months for the bitter cold snap hitting the States.

Like gold, silver has been a strong market this year and bulls have suggested it has better recovery prospects than its more expensive cousin due to its industrial uses and gearing to a worldwide economic recovery.

It’s an argument that doesn’t carry much weight with analysts at US broker Citigroup, however.

The broker note the silver price is up by 13% since the end of 2013 and for this surge to continue Citi said that significant investor physical uptake (in the form of ETF and physical bar holdings) will be needed in the face of muted industrial demand and largely price-inelastic mine supply expansion.

“It should be emphasized that strong retail investor demand for coins and medals in 2013, with record US Silver Eagle coin sales of 47mln oz, was driven largely by falling prices and resultant bargain hunting, while conversely 2013 ETF uptake was muted because of those  same price falls.”

We very much doubt that bullish market sentiment is sustainable due to weakening fundamentals and forecast prices to average $20.4/oz this year. 

Spot silver was down US$0.32 at US$21.09.

On the company front, Mexican silver and gold miner Fresnillo had a tough day as it revealed revenues were 23% lower at US$1.76bn, underlying profits fell 45% to $0.73bn while net profit tumbled 68% to US$240mln.

Major movers

Randgold Resources down 68p at 4,885p

Fresnillo down 27p at 943p

Anglo American up 20p at 1,498p


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