Gold pushes higher as Crimea vote increases threat of sanctions

Monday, March 17, 2014

Overnight trading in Asian equity markets set the week off to a shaky start as Japanese benchmark indices slipped lower, remaining under pressure on Ukrainian tensions while Chinese indices managed to rally higher after Friday’s sell-off. The Nikkei closed down 0.35% towards a six week low while the TOPIX faced a more aggressive sell-off, losing 0.84% overnight. Chinese equity markets were encouraged by the PBOC decision to widen the yuan trading band, a move that followed through on previous commitments of letting market forces play a greater role. As of today, the exchange rate will be allowed to fluctuate by 2% from a daily midpoint rate set each morning. However, the currency reached an eleven month low against the dollar early this morning, trading towards 6.1775, as jittery investors remained pessimistic regarding the growth outlook.

Tensions between Ukraine and Russia are dominating headlines and with all eyes on the referendum over the weekend, investors retreated from risk assets on the uncertainty towards the end of last week. Voters in Crimea indicated their desire to re-join Russia with early polls suggesting as much as 95% of the vote was in favour of the move. The EU and the US have condemned the vote and with the possibility of sanctions against Russia the MICEX has faced considerable selling pressure in recent weeks, trading as low as 42.7842 on Friday. The index has lost over 20% since the start of the month and the rouble weakened further, trading towards 36.72 against the dollar from 32.9 at the start of the year as foreign investors pull funds ahead of any potential economic sanctions.

Spot gold prices pushed above $1,390/oz for the first time since early September as the vote in Crimea boosted haven demand. Prices have rallied over 5% since the start of the month and as much as 16% ytd as concerns of slowing growth in China and geopolitical unrest prompt investors to retreat from equity markets. After steady withdrawals throughout 2013 total known ETF holdings of gold have added 1.5% since the beginning of February.   

CNY weakens against the dollar as PBOC widen trading band

CNY Curncy China Renminbi Spot 2014 03 17 08 01 13

MICEX erases majority of 2013 gains on Crimea concerns

MOEX RX Equity Moscow Exchange 2014 03 17 08 09 12

RUB weakens against the dollar as investors pull funds on sanction threats

RUB Curncy Russian Ruble SPOT 2014 03 17 08 11 49

Gold prices and ETF holdings increase on safe haven demand

ETFGTOTL Index Total Known ETF 2014 03 17 08 17 43

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Topics: Equities, Gold, CNY, RUB
More from: Kash Kamal