Gold will consolidate, today in New York.

Silver will consolidate, today in New York.

Price Drivers

The Ukraine story was seen in context as unlikely to damage global markets, longer term, just those of Russia and its currency, the Ruble. As to a serious escalation of events in Europe, the hold Russian’s hold over European gas supplies is considerably more powerful than the threats of sanctions from Europe, so we don’t expect real action against Russia from either Europe or the U.S. Thus it will be gold neutral, once the dust settles.

But the fall in the Ruble again helped us to appreciate just how vulnerable paper currencies are. Would you accept Rubles in payment of an invoice? So what makes the ‘hard’ currencies completely reliable? This is a deeper question than it seems to be, on the surface. It is why central banks hold gold as an ‘important reserve asset’. As we said yesterday, "However, we feel that apart from a short-term influence on gold it [Ukraine] will not become nearly as great a factor as Asian demand for gold, in 2014. We mustn’t overestimate the influence of the Ukrainian on gold!" Even the Ruble is now recovering, telling us that market moves yesterday were likely traders and speculators taking a short-term chance on bigger moves and are now closing such positions.

There were no purchases of gold into the SPDR gold ETF [GLD] on Monday but a small purchase of gold of 0.33 of a tonne into the Gold Trust, which left their respective holdings at 803.704 tonnes and 164.57 tonnes. This also demonstrates that Ukraine has little impact on institutional investment thinking, inside the U.S.