Gold prices climbed more than 1 percent early on Thursday on heightened geopolitical tensions and news of more US sanctions against Russia, while palladium rose more than 1 percent on renewed supply worries. Safe-haven bids boosted bullion after a Ukrainian fighter plane was shot down over eastern Ukraine as government forces were fighting to quell a pro-Russian separatist rebellion. Russia's UN ambassador later said Russia "did not do it."
Precious metals were underpinned by US President Barack Obama's move to impose sanctions on some of Russia's biggest companies for the first time over Moscow's failure to curb violence in Ukraine, striking at the heart of Vladimir Putin's powerbase by targeting companies closest to him.
The sanctions, the toughest yet imposed by the United States, also helped send palladium to 13-1/2 year highs. The metal is chiefly sourced from Russia. "Palladium is feeding off supply worries as the US imposed new sanctions on Russia, and gold is also getting support on the news at above $1,300 an ounce," said Thomas Capalbo, precious metals trader at brokerage Newedge.
Spot gold was up 1.3 percent at $1,315.91 an ounce at 11:33 am EDT (1533 GMT). US gold futures for August delivery were up $16.40 an ounce at $1,316.20. The yellow metal accelerated gains in late New York morning trade as US equities slid. Investors closely monitored a report that a Malaysian passenger airliner with 295 people on board had crashed in Ukraine near the Russian border on Thursday. The Interfax news agency reported the crash, citing an aviation industry source.
Palladium rallied to a 13-1/2 year high as the new US sanctions fuelled further buying from investors already expecting supply to struggle to keep pace with demand this year. Spot palladium peaked at $887.20 an ounce and was last up 1.8 percent at $886.65. It is the best performing of the main precious metals this year, up 24 percent so far. Spot platinum was up 1.5 percent at $1,499.50 an ounce, while spot silver rose 1.6 percent at $21 an ounce.