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Gold settles 1.3% higher on Ukraine tensions

AP

Gold ended the trading session above $1,315 an ounce Thursday on heightened geopolitical tensions and news of more U.S. sanctions against Russia, while palladium rose more than 1 percent on renewed supply worries.

Safe-haven bids boosted bullion after a Ukrainian fighter plane was shot down over eastern Ukraine as government forces were fighting to quell a pro-Russian separatist rebellion. Russia's U.N. ambassador later said Russia "did not do it."

"These events are very fast moving. If it I doesn't escalate further, we could conceivably see prices fall back down. It's been pretty much thin in the market, given the summer conditions. A lot of technical movements,"said Howard Wen, precious metals analyst at HSBC.

"It's been a tight range and it broke to the upside given the geopolitical event," he said, noting volume was average.

U.S. gold futures for August delivery closed $17.10 higher at $1,316.90 an ounce, up 1.3 percent on the day.

Read MoreBarrick Gold CEO Jamie Sokalsky to step down

Spot gold was last up 1.3 percent at $1,316 an ounce, having dropped more than 3 percent over the first two days of this week to their lowest since mid-June, at $1,291.70.

Symbol
Name
Price
 
Change
%Change
Volume
GOLD
---
GOLD/USD
---
SILV/USD
---
SILVER
---
PALL/USD
---
PLAT/USD
---

Precious metals were underpinned by U.S. President Barack Obama's move to impose sanctions on some of Russia's biggest companies for the first time over Moscow's failure to curb violence in Ukraine, striking at the heart of Vladimir Putin's powerbase by targeting companies closest to him.

The sanctions, the toughest yet imposed by the United States, also helped send palladium to 13-1/2 year highs.

The metal is chiefly sourced from Russia. "Palladium is feeding off supply worries as the U.S. imposed new sanctions on Russia, and gold is also getting support on the news at above $1,300 an ounce," said Thomas Capalbo, precious metals trader at brokerage Newedge.

Read MoreGartman: Nothing makes me a raging bull on gold

"This week has been two-sided - first we had weakness in gold, but by yesterday it had already started to show some relative strength," Commerzbank analyst Daniel Briesemann said.

"Today, the price move is mainly related to news coming out of Russia," he added. "Stocks have been under pressure almost all day, and because they're under pressure, gold is up."

The dollar index eased 0.1 percent on Thursday, while the yen hit a five-month high against the euro on renewed safe-haven inflows as the West's further sanctions against Russia weighed on global risk sentiment.

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—By Reuters with CNBC

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