By A. Ananthalakshmi
SINGAPORE (Reuters) – Gold climbed to a three-week high on Friday after U.S. PresidentĀ Barack ObamaĀ authorised air strikes inĀ Iraq, and the metal looked set to post its best week in seven as global geopolitical tensions spurred safe-haven demand.
Bullion also got a boost from a drop in Asian share prices on growing fears that conflicts inĀ UkraineĀ and theĀ Middle East could sap global growth.
Obama said he had authorised limited U.S. air strikes to blunt an onslaught by Islamic militants inĀ northern IraqĀ and begun military air-drops of humanitarian supplies to besieged religious minorities to prevent a “potential act of genocide”.
The 10-year U.S. Treasury yield hit a 14-month low and the dollar slipped against the safe-haven yen, showing increasing risk-aversion in financial markets.
“There is some panic in the equity markets after theĀ IraqĀ announcement, and that, along with theĀ UkraineĀ crisis is bringing safe-haven demand for gold,” saidĀ Peter Fung, head of dealing at Wing Fung Precious Metals in Hong Kong. “Gold could climb quickly up to $1,325 an ounce.”
Spot gold hit $1,318.60 an ounce, its highest since July 18, and at 0532 GMT was up 0.1 percent on the day at $1,315.
The metal has gained 1.7 percent this week, its first increase in four weeks and the best week in seven. U.S. gold was up about $4 at $1,316.80.
Gold was boosted earlier in the week after U.S. and European equities slumped due to the tension betweenĀ RussiaĀ and the West overĀ Ukraine.
MoscowĀ banned imports of most food from the West on Thursday in retaliation against sanctions against it overĀ Ukraine, a stronger-than-expected response that isolates Russian consumers from world trade to a degree unseen since Soviet days.
TheĀ European Central BankĀ warned that the conflict inĀ UkraineĀ posed a serious risk to the bloc’s economy.
Tensions elsewhere also helped gold. Palestinian militants resumed firing rockets intoĀ IsraelĀ from theĀ Gaza StripĀ on Friday after a 72-hour ceasefire expired.
Meanwhile, in the physical markets, buying interest slowed with the price gains. Prices in top buyer China were on a par with the global benchmark, whereas earlier in the week gold commanded premiums of about $2 or $3 there.
Persistent weakness in physical demand would make it hard for gold to sustain any price rally.
(Reporting by A. Ananthalakshmi; Editing by Edwina Gibbs, Alan Raybould and Biju Dwarakanath)
