Gold futures rebound from one-month low as G-7 imposes further sanctions on Russia

Gold futures rebounded from the weakest level in more than a month after the global leading industrial countries threatened further sanctions to stop Russia from invading other parts of Ukraine, fueling demand for the precious metal as a store of value. Also fanning positive sentiment, assets in the SPDR Gold Trust, the biggest bullion-backed ETF, rose to a more than three-month high on Monday.

On the Comex division of the New York Mercantile Exchange, gold futures for settlement in June surged by 0.34% to trade at $1 315.60 an ounce by 07:45 GMT. Prices shifted in a daily range between $1 317.00 an ounce and $1 310.00 an ounce. Yesterday, gold futures touched $1 308.60, the weakest level since February 20th.

Bullion has retreated from a six-month high of $1 392.60 an ounce on March 17 as turmoil over Ukraine left Russia and the West involved in their worst conflict since the end of the Cold War. The precious metal slid 3.5% last week, the most since the week ended November 22, snapping six weeks of advances.

While gold is up 9% this year amid concern the economic growth of the US may be slowing momentum and amid unrest in Ukraine, Goldman Sachs Group Inc. forecast further declines as the world’s biggest economy rebounds.

Jeffrey Currie, Goldman’s head of commodities research, said in a Bloomberg News interview this month that there are increasing chances, prices would reach $1,000 for the first time since 2009.

Yesterday, G-7 leaders held their first meeting after Russia annexed Crimea last week and announced they wont attend the planned G-8 meeting in Sochi and will hold their own meeting in Brussels.

“I can’t see any other direction for gold other than going higher because this situation isn’t going to resolve itself anytime soon,” said Gavin Wendt, the founder and senior resource analyst at Mine Life Pty in Sydney, cited by Bloomberg. “It’s not going to get resolved and it could spread to other parts of Ukraine.”

Fed stimulus outlook

Federal Reserve policy makers trimmed their bond-buying program by another $10 billion to $55 billion per month, last week. Moreover, Federal Reserve Chair Janet Yellen, said that the first increase in borrowing costs should come “around six months” after the end of the stimulus program. The monetary easing program is expected to be brought to an end this fall.

The Federal Open Market Committee also revised its forecasts, showing more policy makers predicted the main interest rate, now close to zero, would increase at least to 1% by the end of next year and 2.25% by the end of 2016, higher than previously forecast. The Committee also dropped the unemployment rate threshold for considering when to raise interest rates, making a transition to a wider set of data.

The stance of the central bank was seen as slightly more hawkish than investors expected, curbing demand for the precious metal as a store of value.

Assets in the SPDR Gold Trust, the biggest bullion-backed ETP, were increased to 821.47 tons on Monday, the strongest level since December 13. Holdings in the fund are up 1% this year after it lost 41% of its assets in 2013 that wiped almost $42 billion in value. A total of 553 tons has been withdrawn last year.