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Gold Rises to Snap Longest Slump in Four Months on Haven Demand

March 21 (Bloomberg) -- Gold futures rose, snapping the longest slump in four months, as the dispute between Russia and the West over Ukraine escalated, increasing demand for a haven.

Russia completed its annexation of Crimea as the European Union signed a political accord with Ukraine, and President Barack Obama yesterday expanded U.S. financial sanctions against Russian officials and businessmen. Gold dropped in the previous four days, partly on Federal Reserve Chair Janet Yellen’s forecast for rising U.S. interest rates.

“There is some safe-haven buying,” Phil Streible, a senior commodity broker at R.J. O’Brien & Associates in Chicago, said in a telephone interview. “Today’s move maybe temporary as the sentiment has turned negative because of the rate-hike surprise.”

Gold futures for June delivery rose 0.4 percent to $1,336.50 an ounce at 11:58 a.m. on the Comex in New York. Through yesterday, the price climbed 11 percent this year.

The metal dropped 3.5 percent in the past four days. Yellen said on March 19 that U.S. rates may rise around six months after asset purchases end, expected later this year.

On March 17, gold reached a six-month high of $1,392.60 amid faltering U.S. economic growth and escalating tensions in Ukraine.

Goldman Outlook

The rally was based on “transient” factors including a slowdown in the U.S. economy because of cold weather, China credit concerns and geopolitical tensions, Jeffrey Currie, Goldman Sachs Group Inc.’s head of commodities research, said in a report.

“While further escalation in tensions could support prices, we expect acceleration in U.S. growth will bring gold prices lower,” he said.

In 2013, gold tumbled 28 percent, the most since 1981, as some investors lost faith in the metal as a store of value amid a U.S. equity rally to a record and muted inflation.

The Fed this week reduced monthly asset purchases by $10 billion to $55 billion and said bond buying will be tapered in measured steps.

Gold surged 70 percent from December 2008 to June 2011 as the Fed pumped more than $2 trillion into the financial system and cut interest rates to boost the economy.

Silver futures for May delivery fell 0.3 percent to $20.37 an ounce. The price headed for the biggest weekly drop since mid-September. The metal, which has broader industrial applications than gold, declined for the fifth straight session, the longest slump in four months.

Yesterday, a gauge of six industrial metals including copper and aluminum fell to the lowest in almost nine months.

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