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Gold steady above $1,300 as conflicts spur safe-haven bids

Source : REUTERS
Last Updated: Tue, Jul 22, 2014 09:44 hrs
Customers shop inside a gold jewellery showroom in Mumbai

Gold stabilised near $1,310 an ounce on Tuesday as escalating tensions over conflicts in Ukraine and the Gaza strip dented global risk appetite and burnished the metal's safe-haven appeal.

Spot gold was little changed at $1,311.70 an ounce by 0247 GMT. It had gained as much as 0.6 percent in intraday trading on Monday, but failed to hold the gains and closed flat.

Asian stocks edged up in early trading on Tuesday, though the upside was capped by lingering concerns about the Ukraine crisis and violence in Gaza which pressured U.S. yields and the dollar.

"Uncertainty in Eastern Europe and the Middle East should provide support for the metal," Swiss precious metals trader MKS Group said in a note. "Immediate support (is) at $1,310 and a solid break through $1,325-26 (is) required for a continued move higher."

The United States, alarmed by escalating civilian bloodshed in an Israeli offensive in the Gaza Strip, took a direct role in efforts to secure a ceasefire on Monday, as the Palestinian death toll jumped to more than 500.

Despite growing calls for a halt to two weeks of fighting, violence raged on. Israel pounded the coastal strip, killing 28 members of a family in one strike, 11 people in an attack on a high-rise building and four in the shelling of a hospital, medics said.

In Ukraine, tensions continued to run high even as the remains of some of the nearly 300 victims of the Malaysian Airline plane downed over Ukraine were making their way to the Netherlands on Tuesday.

Western governments have threatened Russia with stiffer penalties for what they say is its backing of pro-Russian militia who, their evidence suggests, shot the plane down.

Some traders said sluggish physical demand could keep in check any rally in gold or even result in some near term losses.

Physical demand across Asia has been subdued in the last few months, as buyers take a pause after avid purchases earlier on due to a drop in prices.

On the Shanghai Gold Exchange, local gold prices were on par with London rates on Tuesday, indicating muted buying interest in the top consumer of gold, China.

Investors sold some positions in bullion after the metal snapped a six-week winning streak last week. SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings fell 1.8 tonnes to 803.34 tonnes on Monday.

Markets are also eyeing upcoming data from the United States to gauge the strength of the economy and its impact on the Federal Reserve's monetary policy.

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