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Gold Prices Rise Over MAS Plane Shooting
Perspective | 22 July 2014

The precious yellow metal will most likely be on an upscale trend following the destruction of the Malaysian airliner in Ukraine last Thursday.

The incident, which saw around 290 people lose their lives, also caused Malaysian Airlines’ shares to decline by 17.8 percent early Friday, 18 July, although the airline still managed to cut losses and settled 8.9 percent at the end of the trading day.

The Malaysian Airlines plane travelling from Amsterdam to Kuala Lumpur was hit directly by a missile and crashed at Torez. Neither the Russians nor the separatists are claiming responsibility for the attack.

Gold, an investment vehicle turned to in times of political tensions, saw prices rise last Thursday after the unfortunate event.

“Geopolitical risks at the moment are quite elevated,” said an analyst associated with the Australian and New Zealand Banking Group. “The move overnight is warranted given the risks out there. In the near-term, we can certainly see some more upside.”

The precious yellow metal rallied by 9.5 percent this year due to the tensions in Iraq and conflict between Russia and Ukraine. Several months ago, gold investments also rose as the U.S. Fed suggested that their interest rates would stay low.

The shooting down of the Malaysian Airlines plane will reverse investors’ sentiment on gold, which was mostly bearish due to the assertion of Fed Chief Janet Yellen that higher interest rates may come sooner than expected if the labor market keeps surprising central banks with higher wages and employment.

When interest rates are high, gold prices weaken since investors transfer their investments to assets with high-yielding interest rates.

Gold, unfortunately, doesn’t yield high interest rates. Investment site Bullion Vault has a good bird’s-eye view on how the markets work for gold and information on what investors can do during political instability.

Gold futures for August delivery increased 1.3 percent and settled at US$1,316.90 on the COMEX division of the New York Mercantile Exchange.

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