BULLION LATEST – Gold price up on European bank concerns and geopolitical risks

Jul 11, 2014 - 5:14 AM GMT

The gold and silver price rose to fresh three-month highs in early European trading on Thursday on a combination of a slump in equities, banking concerns in Portugal and increase in geopolitical risk.

Latest news overnight that weighed on the larger markets were reports saying that a Portuguese bank, Espirito Santo International (a parent of Banco Espirito Santo SA, Portugal’s second-largest lender) missed commercial paper payments to a “few clients”.

The bank’s shares tumbled close to 17 percent while Portugal’s benchmark stock index fell four percent. Fears over a resurfacing of European banking woes drove the US markets down as well, with the S&P 500 closing down 0.4 percent, the DJIA slumping 0.4 percent and Nasdaq down 0.5 percent.

Over in Asia, stocks markets were mixed, with the Nikkei down 0.26 percent while the Hang Send up 0.17 percent.

“Gold benefited from a flow of funds as global equities backed off, on investor caution surrounding the possibility of contagion set by weakness in the European banking sector,” HSBC Securities analyst James Steel said.

Geopolitical risk may also have played a role, with UN chief Ban Ki-moon earlier quoted as saying that the conflict between Hamas and Israel in Gaza is on a knife-edge.

In other news, the Indian Finance Minister surprised the gold market by not delivering a cut to the gold import duty.

“The immediate response in the domestic gold market has been a jump in the gold price by two percent,” said commodity strategist Victor Thianpiriya from ANZ Bank.

Spot gold traded up close to $10 on the day, closing at $1,336.50 and hit a peak of $1,345.30 per ounce. Current prices are at $1,337.90. Silver followed in gold’s footstep as well, rising 1.5 percent on Thursday to $21.42 per ounce.

In the PGMs, platinum gained 0.5 percent to $1,513 but largely gave back those gains overnight to the current $1.506. Palladium was flat at $872 yesterday while current prices are slightly lower at $868 per ounce.