Gold Bulls Run for $1,400 as Ukraine Turmoil Fuels Haven Demand By Debarati Roy Mar 4, 2014 11:00 AM ET
Gold traders are setting their sights on $1,400 an ounce, a price not reached since September, as the worst standoff between the West and Russia since the end of the Cold War increases demand for the metal as a haven.
The most-traded bullion option on the Comex yesterday was a call giving owners the right to buy at $1,400 by April, with an estimated 1,972 lots changing hands. That compares with an average volume of 314 in the past month. Almost 1,000 calls giving the right to buy at $1,400 by June traded, the second-most popular bet.
Investors are once again flocking to the precious metal, leaving prices poised for the biggest quarterly gain since 2007. Russia’s growing military presence in Ukraine is the latest sign of global turmoil fueling the rally after slowing U.S. economic growth and slumps in emerging-market currencies. Money managers are the most bullish on gold in 14 months, government data show. Bullion tumbled 28 percent in 2013, the biggest drop since 1981.
“Worries about a possible conflict are very constructive for gold, and we are seeing momentum traders come in,” Quincy Krosby, a market strategist for Newark, New Jersey-based Prudential Financial Inc., which oversees more than $1 trillion of assets, said in a telephone interview. “The mixed economic numbers out of the U.S. and concerns about slowdown in other parts of the world have boosted demand for a safe-haven asset.”
Gold futures for April delivery gained 2.2 percent yesterday to $1,350.30 on the Comex in New York, after touching $1,355, the highest since October. The April $1,400 call surged 240 percent yesterday to $5.10.
Hedge Funds
Hedge funds and other money managers boosted their gold net-long position, or bullish bets, by 25 percent to 113,911 contracts in the week to Feb. 25, the highest since December 2012, U.S. Commodity Futures Trading Commission data show.
“The fundamentals are very supportive, and gold looks good technically as well,” Bill O’Neill, a partner at Logic Advisors in Upper Saddle River, New Jersey, said in a telephone interview. “If the market is able to hold on to its gains in the next few sessions, we could rise to $1,400.”
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