Gold Hits Six Month High As Cold War-Style Tensions Mount

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Gold Hits Six Month High As Cold War-Style Tensions Mount
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As reports emanating from Estonian officials warning of an impending Russian military invasion of Eastern Ukraine from persist, and the Russian government is making statements that Ukraine has “lost control” of the eastern part of the country and that it “reserves the right to intervene,” investors watch as gold is near a six month high and concerns in China won’t go away.

As 2 PM EST, the stock market was down slightly but traders are watching the close – and more importantly the weekend action – and gearing up for what could be a highly volatile start to the week Monday.

Who wants to hold stocks over the weekend?

The key questions traders are asking is: who wants to take home significant long positions in the stock market this weekend?

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In mid afternoon trading gold was up slightly, after rising nearly 2% on the week as a result of global fears.  Money is flowing into gold-backed ETFs, and China and India, among other nations, appear to be significantly purchasing the physical metal, a report on CNBC noted that “physical demand has quieted as higher prices put off buyers – making some cautious about how long the rally can last.”  The report said demand in China, the world’s biggest bullion consumer, has fallen off with prices in Shanghai at a discount to spot prices.  Spot gold is at its highest level since Sept. 9, $1,387 per ounce, with gold futures exhibiting backwardation at $1,379 per ounce.  Holdings in SPDR Gold Trust (ETF) (NYSEARCA:GLD), the world’s largest gold-backed exchange-traded fund, has risen to 2.10 tons to 813.30 tons on Thursday, according to the report.

Cold war concerns

Traders note that gold has been getting a big on global uncertainty, the most recent of which emanated from Russia.  If Russia invades Ukraine it would be the most aggressive action taken by the former communist flag bearer since the cold war “ended” and could usher in a new tension.

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Mark Melin is an alternative investment practitioner whose specialty is recognizing a trading program’s strategy and mapping it to a market environment and performance driver. He provides analysis of managed futures investment performance and commentary regarding related managed futures market environment. A portfolio and industry consultant, he was an adjunct instructor in managed futures at Northwestern University / Chicago and has written or edited three books, including High Performance Managed Futures (Wiley 2010) and The Chicago Board of Trade’s Handbook of Futures and Options (McGraw-Hill 2008). Mark was director of the managed futures division at Alaron Trading until they were acquired by Peregrine Financial Group in 2009, where he was a registered associated person (National Futures Association NFA ID#: 0348336). Mark has also worked as a Commodity Trading Advisor himself, trading a short volatility options portfolio across the yield curve, and was an independent consultant to various broker dealers and futures exchanges, including OneChicago, the single stock futures exchange, and the Chicago Board of Trade. He is also Editor, Opalesque Futures Intelligence and Editor, Opalesque Futures Strategies. - Contact: Mmelin(at)www.valuewalk.com
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