Commodity Update; Gold – 11 November 2014

Gold volatility picks up as divergent growth and reawakening of Ukraine crisis wrong foot investors

After spending much of the week under increasing pressure, Gold rallied on Friday as reports emerged from western media outlets detailing how the rumble of tanks and artillery had shattered the peace in Ukraine once again.

While statements from both eastern Ukraine and Kiev had began to indicate that the ceasefire was under increasing pressure as early as Wednesday, it wasn’t until the closing hours of the week that investors and traders began to react.

After being driven to a new multi year low by better than expected US economic data and the indifference of investors to the increasing likelihood that the ECB will embark upon its own quantitative easing program, Friday’s sharp move higher saw gold gain 4.3% on the day.

Despite reports of further violence in Ukraine over the weekend, the metal sank at the open on Monday as investors appeared to adopt more of a wait and see approach to the resurgent crisis.

Although we continue to believe that lower levels are likely for gold during the weeks and months ahead, Friday’s movement underlines the risks inherent in an excessively bearish outlook for the metal.

For this reason our earlier caveat remains in place. This is that, while we expect gold to trend lower on the whole over the months ahead, intermittent bouts of resurging geopolitical and conflict risks can be expected to provide the necessary impetus for occasional corrective moves to the upside.

Spot Gold // Hourly Intervals

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