Gold, silver rally on safe-haven demand

By
Thursday, August 28, 2014

Mounting geopolitical concerns in Ukraine helped gold prices climb on Thursday, despite positive US economic data.

Tensions over Ukraine increased following further reports of Russian involvement in the conflict between Ukrainian government forces and pro-Russian rebels, which spurred safe-haven demand for the yellow metal.

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"Renewed tension around Ukraine and allegations of more Russian troops involved in the conflict fuelled what we believe is largely short covering," Standard Bank said in a note.

Gold closed up US$9.25 at US$1,292/oz in London, its highest level in more than a week, while silver also rallied, ending the day 43 cents higher at US$19.75/oz, a two-week high.

Gold's increase came despite US commerce department data showing GDP grew 4.2% in Q2, higher than the 4.0% in a previous estimate.

Yellow metal prices have also been depressed due to weak physical demand and a strong US dollar in recent weeks.

CHINA DEMAND TO RISE

China became the world's largest gold market in 2013, and demand is expected to grow by a further 20% by the end of 2017, the World Gold Council said in a report.

Much of the growth has come from demand for jewelry, bars and coins, which remains a sustainable source of ongoing consumption, backed by growing gold holdings among central banks and Chinese authorities, the council said.