Gold jumps in Europe

Gold rose 1.6 percent Wednesday, extending modest early gains as concerns of an escalation of the conflict in Ukraine put global equities under sustained pressure, raising demand for assets perceived as an insurance against risk. Russia has amassed around 20,000 troops on Ukraine's eastern border and could use the excuse of an humanitarian or peacekeeping mission to send them into Ukraine, Nato said in a statement on Wednesday.
Spot gold rose as much as 1.6 percent to a one-week high of $1,309.20 an ounce and was up 1.5 percent at $1,306.31 an ounce by 1407 GMT. US gold futures for December delivery were up $22.20 at $1,307.50 an ounce. "We saw some strong buying at the US open and the most likely reason is the weakness in stocks," Quantitative Commodity Research director Peter Fertig said.
"Worries about the business cycle in the euro zone after soft economic data in Germany and other countries has lifted demand for safe havens like government bonds and precious metals, which gained despite negative factors like the stronger dollar." Bouts of international political tension, mostly in Ukraine and the Middle East, have partly been responsible for gold's eight percent gain year to date, as these have reduced investors' appetite for risk.
Wall Street opened lower on Wednesday, while European stocks dropped, also pressured by data showing German industrial orders fell in June at their steepest rate since September 2011, with the economy ministry saying international political concerns had probably led to more cautious ordering. Risk aversion and upbeat US economic data, which included a spike in service-sector activity to a nine-year peak and a uptick in factory orders on Tuesday, have however helped lift the dollar to an 11-month high against a basket of major currencies.
A stronger US currency makes dollar-denominated assets like gold more expensive for other currency holders. Bullion investors will continue to monitor US data releases after last week's mixed readings showing second-quarter gross domestic product rebounded sharply but jobs growth in July slowed.
"Buying below $1,300 gold proved attractive once again as most funds are under invested in the second half of the year even though we have more than geopolitics, economics, and upcoming mid year elections in the fall," RBC said in a note. The physical markets have failed to provide support to prices recently due to the seasonally quiet summer period.
Premiums in top buyer China have been stuck at $2-$3 an ounce and demand is much weaker than last year, dealers said. Chinese gold jewellery demand fell for the first time in eight years in the second quarter and could drop as much as 20 percent in the full year, a leading precious metals consultancy said last week. Silver rose 1.5 percent to $19.99 an ounce after dropping to a seven-week low in the previous session on strong US data and a higher dollar. Platinum rose 0.5 percent to $1,456.10 an ounce, while palladium was down 0.1 percent at $843.50 an ounce.