Gold up 1 pct on lower dollar, stocks; platinum, palladium rise
New York (May 14) Gold rose around one percent on Wednesday after the dollar and global equities came under pressure as investors awaited confirmation of further stimulus measures from the European Central Bank.
Gold also tracked strong gains in platinum and palladium on worries that increasing labour tensions in major producer South Africa could hurt supply.
"It's the strength in industrial metals that is lifting gold and silver," Saxo Bank head of commodity strategy Ole Hansen said.
South Africa increased security in the platinum belt after four deaths over the weekend, to protect miners who have decided to ditch a 16-week strike that has halted 40 percent of normal global output.
About 1,000 stick-wielding strikers gathered outside Lonmin's Marikana platinum mine on Wednesday, preventing workers from breaking the longest and costliest bout of industrial action in the sector's history.
South Africa is the top producer of platinum and the world's second biggest producer of palladium after Russia.
Spot gold was up 1 percent to $1,305.10 an ounce by 1443 GMT, while U.S. gold futures for June delivery climbed $10.20 to $1,305.00 an ounce.
Platinum rose 1.7 percent to its highest in two months at $1,474.50. Palladium gained 1.3 percent to $824 an ounce, its highest since August 2011.
"Added to the South African situation, we are seeing a breakout to the downside in U.S. government bond yields and this gives a little support to the precious metals today," Hansen said.
"Even after the strong U.S. PPI number we just had a small selloff in bonds but now they are back up trading at session highs and that's being driven by the ECB contemplating a rate cut in June."
In wider markets, the dollar was down 0.1 percent against a basket of currencies, failing to benefit from data showing U.S. producer prices posted their largest increase in 1-1/2 years in April.
U.S. 10-year Treasury yields fell to around 2.5 percent. Returns from U.S. bonds are closely watched by the gold market, given that the metal pays no interest.
European and U.S. shares dipped on expectations the European Central Bank was preparing a package of policy options for its June meeting, including cuts in all its interest rates and measures aimed at boosting lending to small- and mid-sized firms.
Silver rose to a one-month high of $19.97 an ounce.
The London silver "fix", a global benchmark for spot prices, will cease to operate after Aug. 14, the company that administers the process said on Wednesday, amid rising regulatory scrutiny of price-setting in bullion markets.
UKRAINE CONCERNS
Pro-Russian separatists ambushed Ukrainian troops on Tuesday, killing seven in the heaviest loss of life for government forces in a single clash since Kiev sent soldiers to put down a rebellion in the country's east.
With the uprising and Russia's annexation of Crimea poisoning East-West relations, Moscow retaliated against U.S. sanctions by hitting aerospace projects. One such step was its refusal to extend the life of the International Space Station, a showcase of post-Cold War cooperation.
"We remain constructive on the (precious metals) group as a whole as we think the geopolitical tensions with the Ukraine, coupled with the spiralling unrest in South Africa, will both combine to provide more upside impetus," said INTL FCStone analyst Edward Meir.
