In destabilising economic war over Ukraine, gold the winner – by Lawrence Williams (Mineweb.com – April 25, 2014)

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U.S. data and the escalating Ukraine crisis have seen gold Yo-Yo down and back up again.

LONDON (MINEWEB) – Some very volatile trading in gold and silver yesterday. The former dived to its lowest price since February to around the $1,270 mark before almost immediately rebounding sharply to a little below $1,300 before settling above $1,290, a position it held overnight.

Silver, living up to its more volatile general role at one stage dipped down below $19.00, its weakest level since its December lows before it too revived sharply jumping back to close the day at around the $19.60 level before settling back to around $19.55 where it was sitting this morning as Europe opened.

Analysts put the price movements to factors such as U.S. economic data, but in this writer’s view the downturn was largely due to a loss in confidence by traders in the prospects for short term precious metals price growth following gold and silver’s lacklustre performance as it drifted downwards – but then the recovery came on the back of the deteriorating situation on the ground in the Ukraine. Ukrainian forces started to move in to quell the demonstrations and government building occupations in the Donetsk region in the east of the country.

There are thus fears that any violent clampdown would lead to Russia’s President Putin sending in his troops across the border to protect what Russia sees as its own interests and the interests of ethnic Russians and Russian speakers there.

Ukraine seems to be, in effect, a gigantic poker game with serious potential consequences should the major powers talk themselves into a corner where some kind of shooting conflict becomes virtually inevitable. While it seems unlikely that NATO would actually engage Russian forces directly in support of Ukraine, one can’t rule out this possibility.

And as for sanctions against Russia these have so far been pinpricks hardly worthy of a response. But should these be escalated into something which seriously affects the Russian economy, which is beginning to look increasingly likely, then Russia will undoubtedly retaliate with its own potentially damaging economic measures against Europe and the U.S.

While economic sanctions may have a more drastic effect on the Russian economy than any retaliatory measures might have on the West, the Russian people may be more likely to be prepared to ride out a subsequent economic storm than their Western counterparts.

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