Gold rises as Ukraine tensions hurt German sentiment

London  (Aug 12)  Gold prices edged higher on Tuesday, supported after two days of declines by signs that the stand-off between Russia and Ukraine was hurting economic confidence in the euro zone economy.

Analyst and investor morale in Germany, Europe's largest economy, plunged in August to its lowest level in more than a year and a half as the crisis in Ukraine took its toll, the ZEW monthly survey showed.

"Improving gold prices are due to escalations of Ukraine-Russia tensions and Iraq conflicts, but traders are also worried about Europe snail's pace recovery," said George Gero, vice president at RBC Capital Markets in New York.

Spot gold was up 0.6 percent at $1,315.60 an ounce by 11:28 p.m. EDT (1528 GMT), while U.S. COMEX gold futures for December delivery were up $6.70 an ounce at $1,317.20.

Gold's gains came as the dollar rose against the euro on the German sentiment report, and the S&P 500 equities index slipped on heightened uncertainty over Ukraine and the Middle East. U.S. Treasury bond yields inched up but remained near a 14-month low hit during a bond market rally that suggested a flight to safety.

Russia said on Tuesday a convoy of 280 trucks had left for Ukraine carrying humanitarian aid, amid Western warnings against using help as a pretext for an invasion.

Gold has gained about 9 percent this year, largely on tensions between the West and Russia over Ukraine and violence in the Middle East. The metal is seen as an alternative investment to riskier assets such as equities.

While geopolitical tension has inspired some sporadic investment buying, gold has not enjoyed much physical demand. For instance, physical demand in top consuming region Asia has been sluggish after a record year in 2013. Also, investors have been cutting positions in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund.

Gold has largely been stuck in a range between $1,280 and $1,325 in the last 30 days despite rising geopolitical tensions.

"Unless we see another major change, I don't think the current news is going to lead us to break out of that range," said Mitsubishi analyst Jonathan Butler.

Among other precious metals, silver was down 0.2 percent at $19.97 an ounce, while platinum edged up 0.3 percent to $1,470.10 an ounce and palladium gained 0.3 percent to $876.55 an ounce.

Palladium, which hit 13-1/2 year highs last month, is close to its most expensive level by comparison with platinum since mid-2002.

Source: Reuters