Precious Metals Lift After Plane Crash

Precious Metals Lift After Plane Crash

Gold and other precious metals have extended their gains following reports that a Malaysia Airlines passenger jet had gone down near the conflict-torn border between Russia and Ukraine.

The news sent prices for precious metals soaring. Gold for August delivery, the most actively traded contract, on Thursday closed up $US17.10, or 1.3 per cent to $US1316.90 a troy ounce on the Comex division of the New York Mercantile Exchange.

Palladium hit a new 13-year high, rising one per cent to close at $US885.10 a troy ounce vs ounce ounce, and platinum rallied 1.5 per cent to $US1503.70 a troy ounce. Silver was up 1.7 per cent to $US21.134 a troy ounce.

An adviser to Ukraine's Interior Ministry said a Malaysia Airlines passenger plane carrying more than 200 people crashed on Thursday while flying over the east Ukraine region of Donetsk. The crash immediately sparked speculation about the cause amid fighting between Ukrainian forces and pro-Russia separatists. Several other planes have been downed in recent days.

Malaysia Airlines said it had lost contact with Flight MH17 and its last known position was over Ukrainian airspace.

Investors often buy gold as a hedge in times of political or economic instability, believing it will hold its value better than other assets.

Platinum and palladium, meanwhile, rose because investors worried that an ongoing confrontation with the West could lead Russia to cut exports of the metals, further tightening a market that has already been depleted by a five-month miners' strike in South Africa. Russia is the world's largest palladium producer, followed by South Africa, and the world's second-largest platinum producer, following South Africa.

"Everyone just started buying gold as soon as the news hit," said Thomas Capalbo, a broker at Newedge.

"In the eyes of the market, this is the exact type of news that would make you buy gold." Prices for precious metals had already been boosted earlier in the session, as investors reacted to a fresh round of US sanctions against Russia.

The US ratcheted up sanctions on Wednesday against Russia over the fighting in Ukraine, imposing restrictions on state-controlled oil company OAO Rosneft and other firms. The US and Europe say separatists in Ukraine are getting significant support from Russia, an accusation Moscow has denied.

"Anything that looks like it could take Russian sources off the market is going to pressure prices for platinum and palladium higher," said Frank McGhee, head of precious metals at Integrated Broker Services.

Anglo American Platinum Ltd, the world's largest primary platinum producer, on Thursday said platinum production fell 40 per cent in the second quarter from a year ago due to the South African strike.

The strike ended on June 24 when platinum miners signed a three-year wage deal with the industry's leading labour union.