Gold rose more than 1 percent on Wednesday as concerns over escalating tensions in Syria, US sanctions on Russia and the US-China trade stand-off weighed on stock markets and the dollar index. The metal hit a two-week high as appetite for nominally lower-risk assets sharpened. Palladium, which has also benefited from expectations that sanctions on Russia could hurt supply, rose further after climbing nearly 6 percent in the past two days.
Spot gold was up 0.9 percent at $1,350.80 an ounce at 1330 GMT, off an earlier peak of $1,355.21. US gold futures were 0.7 percent higher $1,354.60. "We've seen fears of a trade war and now more recently the Russian sanctions," said Capital Economics analyst Simona Gambarini. "Uncertainty, volatility and geopolitical risk have been rising steadily since the start of the year."
That has sparked good demand for gold through products such as bullion-backed exchange-traded funds, she said. "Gold is benefiting from the risk-off sentiment and because people are trying to hedge against worst-case scenarios." European equities fell after two days of gains as tensions over Syria and US sanctions drove Russia's rouble to a two-year low, while concerns about the prospect of a trade war boosted traditional safety plays at the dollar's expense.
The US unit languished near a two-week low against a basket of currencies. Gold is often perceived as a safe store of value during times of political and financial uncertainty. Markets are also awaiting clues on the outlook for US monetary policy from minutes of the March meeting of the Federal Reserve's Federal Open Market Committee (FOMC), due later on Wednesday. Tighter monetary policy raises the opportunity cost of holding non-yielding bullion.
Gold has been caught within a trading range between $1,300 and $1,360 since the end of January. The metal needs to break that resistance to make a sustained move out of its current range, Afshin Nabavi, head of trading at MKS, said. "We have FOMC minutes later today. The market is very nervous about the geopolitical situation," he said. "My guess is... we should see $1,400 sooner rather than later." Among other precious metals, silver was up 0.6 percent at $16.65 an ounce, while platinum was 0.8 percent higher at $928.49.
Palladium was up 0.2 percent at $955.80. The metal, more than 40 percent of which is produced in Russia, has bounced strongly this week as sanctions against Moscow fed into a technically driven rebound after the first quarter's 10 percent slide. Although Russian output of the metal has not been affected directly, the sanctions have caused enough concern over supply in a market that has been in deficit for a decade to bring some speculative money back in, analysts said.
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