Gold rose to a three-week high early on Monday as renewed concerns over the escalation of hostilities in Ukraine prompted investors to add positions in bullion as a hedge, while supply fears lifted palladium prices to a fresh 2-1/2 year peak.
Gold's safe-haven appeal increased on growing violence between pro-Russian separatists and Ukrainian government forces, and news that a Russian fighter aircraft made repeated low-altitude, close-range passes near a US ship in the Black Sea over the weekend. Expectations the Federal Reserve will be cautious in raising interest rates in the future and an uncertain outlook for US equities boosted gold buying, analysts said.
"I think the need to have some gold in investment portfolios for safety now is more than ever," said Phillip Streible, senior commodities broker at RJ O'Brien. "A lot of people don't necessarily trust the stock market at the moment."
Spot gold was up 0.7 percent at $1,327.10 an ounce by 2:08 pm EDT (1808 GMT), having earlier touched its highest since March 24 at $1,330.90. US COMEX gold futures for June delivery settled up $8.50 at $1,327.60 an ounce. Trading volume was about 50 percent below its 30-day average, preliminary Reuters data showed. Gold has now posted gains in four out of the last five sessions, after falling below $1,280 an ounce on April 1 to its lowest in nearly two months on signs of easing tensions between Russia and the West over Ukraine.
Palladium was up 1.2 percent at $809.75 an ounce for its fifth session of gains. The autocatalyst metal hit its highest since August 2011 at $816.10 an ounce on growing fears supply would suffer from fresh US sanctions on top producer Russia, as well as prolonged labour strikes in No 2 miner South Africa. Among other precious metals, platinum gained 0.7 percent to $1,460.40, having earlier hit its highest in nearly a month at $1,469.90 as labour strikes continued in South Africa. Silver inched up 1 cent at $19.96 an ounce.
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