Fool's Gold Report: Bullion Prices Jump to 2014 High

Gold rose to its best level in four months. Find out what's behind the move.

Feb 24, 2014 at 5:33PM

A booming stock market brought gold prices along for the ride, as enthusiasm for perceived higher-risk assets enhanced investors' appetite for both asset classes. According to preliminary settlement figures, April gold futures at the Comex rose $14.40 per ounce to $1,338, their highest level in about four months. March silver futures posted similar percentage gains, rising about $0.27 per ounce to $22.05. Those moves sent the SPDR Gold Shares (NYSEMKT:GLD) and iShares Silver Trust (NYSEMKT:SLV) up about 1% each, but mining stocks didn't respond as favorably, as the Market Vectors Gold Miners ETF (NYSEMKT:GDX) finished up just 0.7%.

Metal

Today's Spot Price and Change From Yesterday

Gold

$1,337, up $11

Silver

$22.00, up $0.15

Platinum

$1,435, up $11

Palladium

$739, up $1

Source: Kitco. As of 4 p.m. EST.

Will trouble in Ukraine be positive for gold?
Investors turn to gold in times of trouble, and one of the biggest risks that drive gold prices has to do with political events that have the potential to affect world markets. The unrest in the Ukraine definitely qualifies as such an event, with the ouster of the nation's president over the weekend. Given the important policy decisions at stake -- whether to align itself more with Europe or to maintain its historical ties to Russia -- investors want to protect themselves against what could become a much more violent conflict if a resolution isn't reached in the near future.

Gold And Silver

Image sources: Wikimedia Commons; Creative Commons/Armin Kubelbeck.

For now, it seems unlikely that the Federal Reserve will react any more strongly to events in Ukraine than it did to problems in Argentina and Turkey. As long as the impact on the U.S. is minimal, the Fed appears determined to continue its path toward removing quantitative easing steadily throughout the course of 2014.

Geopolitics are playing a role in the metals markets as well. One key reason why Newmont Mining (NYSE:NEM) hasn't participated in the big climb for gold-mining stocks is that some of its key production assets are located in Indonesia. Both Newmont and Freeport-McMoRan Copper & Gold (NYSE:FCX) are highly exposed to Indonesian policies that call for export taxes and demand for value-added processing in-country rather than exporting raw unprocessed copper ore. Newmont's Nusa Tenggara unit said that once its local warehouse reaches its 80,000-ton capacity, it might have to shut down its mining activities since it can't afford to pay export duties.

Gold investors need to keep their eyes on the political situation worldwide. If tensions rise, the impact on gold could be swift and positive. But a reduction in tensions could take away one key support for gold's recent rise, making further gains dependent on fundamental demand from both consumers and investors for gold, silver, and other precious metals.

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Dan Caplinger owns shares of Freeport-McMoRan Copper & Gold. The Motley Fool owns shares of Freeport-McMoRan Copper & Gold. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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