May 8 (Bloomberg) -- Gold traded above this week’s low in New York as investors weighed the outlook for U.S. stimulus with tension over Ukraine.
Prices fell 1.5 percent yesterday, the most since April 15, as Federal Reserve Chair Janet Yellen told a congressional panel “sufficient underlying strength” made measured reductions in bond purchases “appropriate.” While economic data show “solid growth” in the second quarter, the U.S. economy still requires stimulus, she said. The Bloomberg Dollar Spot Index reached the lowest since October as Yellen prepared to testify to U.S. lawmakers for a second day.
Gold slid 28 percent last year on speculation the Fed would scale back asset purchases. It rebounded 7.5 percent this year, partly as tension over Ukraine spurred demand for a haven. Russian President Vladimir Putin said Russia is testing its army’s combat readiness, ramping up tensions after pledging a pullback from Ukraine’s border. Pro-Russian separatists in Ukraine vowed to press ahead with autonomy votes.
“Safe-haven buying has dominated jittery gold trading since early April amid a lack of other drivers,” Andrey Kryuchenkov, an analyst at VTB Capital in London, wrote today in a report. Declines are “likely, should matters de-escalate from here. We expect limited upside in the second half of 2014, with bullion ever-so sensitive to the Fed’s policy expectations.”
Gold for June delivery added 0.3 percent to $1,292.40 an ounce by 8:16 a.m. on the Comex in New York. It reached $1,286.60 yesterday, the lowest since May 2. Futures volume was 16 percent below the average for the past 100 days for this time of day, data compiled by Bloomberg showed. Bullion for immediate delivery increased 0.2 percent to $1,292.01 in London, according to Bloomberg generic pricing.
Gold rose 70 percent from December 2008 to June 2011 as the Fed bought debt and cut interest rates to a record in a bid to boost the economy. Fed officials trimmed stimulus last week for the fourth consecutive meeting and are on track to halt buying in the second half of 2014.
Russia has massed about 40,000 troops along the Ukrainian border, according to the North Atlantic Treaty Organization, which said there’s no sign of any Russian withdrawal. Ukraine’s Foreign Ministry said in a statement last night it needed “real proof,” and the country’s border service said yesterday Russian military drills close to the frontier were continuing.
Putin yesterday urged separatists in the Donetsk and Luhansk regions to postpone balloting scheduled for May 11.
Silver for July delivery was little changed at $19.335 an ounce in New York. Platinum for July delivery rose 0.5 percent to $1,442.40 an ounce, after reaching $1,459.60 on May 6, the highest since April 15. Palladium for June delivery gained 1.1 percent to $805.15 an ounce. It climbed to $822 two days ago, the highest since August 2011.
Prices rose 12 percent this year on concern supply would be restricted by a miners’ strike in South Africa and as western nations threatened Russia with sanctions. The two countries are the biggest producers of palladium. Holdings of the metal in exchange-traded products rose 2.4 percent to a record 84 metric tons yesterday, data compiled by Bloomberg show.