Gold Gains As Ukraine Referendums Fuel Tensions

 | May 12, 2014 07:30AM ET

After a quiet few days, Gold has bounced back and climbed close to the $1300 level in Monday trade. In the European session, the spot price stands at $1296.44. The metal has gained ground as voters in referendums held in eastern Ukraine voted for self-rule. On Friday, US JOLTS Jobs Openings disappointed with a soft reading in April. It's a quiet day on the release front, with just one economic release - the US Federal Budget.

The crisis in Ukraine continues to take twists and turns, leading to volatility in gold prices. Last week, Russian President Vladimir Putin surprised observers when he urged pro-Russian separatists to postpone their referendum on independence. However, the separatists shrugged off Putin's request and went ahead with referendums in two cities in eastern Ukraine. Not surprisingly, voters in this pro-Russian region voted in favor of self-rule. The Ukraine government and Western countries denounced the referendums as illegal. Elections scheduled in Ukraine for the end of May remain in jeopardy and there are mounting fears that the country could slide into civil war.

US Unemployment Claims rebounded last week, as the key indicator dipped to 319 thousand. This beat the estimate of 328 thousand. The reading follows last week's excellent Nonfarm Payrolls and Unemployment Claims. JOLTS Jobs Openings failed to keep pace, slipping to 4.01 million, well off the estimate of 4.21 million. With the employment picture brightening, market sentiment remains strong toward the US economy, and this could strengthen the US dollar.

Federal Reserve Chair Janet Yellen testified before Congress on Wednesday and Thursday, and gave a cautious thumbs-up to the economic recovery. She said that the economy has improved, but pointed to two sore spots - the job market remains weak and inflation is below the Fed's target of 2%. Yellen stated that she therefore expects that low interest rate levels will continue for a "considerable time". Yellen has stated previously that slack remains in the economy, and the Fed is expected to proceed carefully with future trims to its QE scheme. Since December, the Fed has trimmed the asset-purchase program by almost half, cutting it to $45 billion each month.

XAU/USD for Monday, May 12, 2014