Gold prices ease on 4 March as Russian ends military drills.
Gold prices ease on 4 March as Russian ends military drills.Reuters

Gold prices dropped from the highest level in over four months after Russia ended military exercises in an area that borders crisis-hit Ukraine, which had sparked demand for gold as a safe haven.

Bullion for immediate delivery shed 0.8% to $1,339.25 an ounce by 10:07GMT in London. It hit $1,354.87 on 3 March, the highest since 30 October.

Gold for delivery in April also shed 0.8% to $1,339.20 on the Comex in New York, where trading volume was 38% above the average for the past 100 days for this time of day, Bloomberg data showed.

Gold probably extended losses after the Interfax report on Russian troop withdrawals, said Victor Thianpiriya, an analyst at Australia & New Zealand Banking.

"The current round of gains may retrace should the tension in the Ukraine ease," Thianpiriya said in a note to clients before prices eased on 4 March.

Commerzbank Corporates & Markets said in a note to clients: "After the gold price rose temporarily to a four-month high of $1,355 per troy ounce [on 3 March], we are seeing some profit-taking this morning. The price rise came on the back of the increasing tensions between Russia and Ukraine, which sparked greater demand for gold as a safe haven. Because the conflict looks like it could well last some time, gold should be well able to defend its current price level, and even gain further ground again in the short term.

"In India, the world's second-largest consumer of gold, bullion dealers and jewellers are planning a one-day nationwide strike [on 10 March] in a bid to have import restrictions on gold eased. By its own account, the Indian Ministry of Commerce is in the process of discussing with the Ministry of Finance and the central bank whether the import regulations could be changed. If this were to happen, India would doubtless buy considerably more gold on the world market again, which is likely to be reflected in higher prices."

"According to Australian mining consultant firm Surbiton Associates, Australia last year stepped up its gold production by 7% to a ten-year high of 273 tons, despite the fall in prices - the firm reports that gold producers processed significantly more higher grade ore, meaning that the production volume could be increased and costs lowered. After China, Australia is the world's second-largest gold producer," the German firm added.

Bullion gained some 2.1% on [3 March] on as fears about a war between Russia and the Ukraine.

Prices rose amid news that China had backed Russia in the tense standoff with the US and Europe that erupted following the pro-West revolution in Ukraine.

Gold prices have risen some 11% so far this year.