Gold Ends Above $1300 On ECB Moves, Ukraine

(RTTNews) - Gold futures ended higher Wednesday, amid news that Germany's Bundesbank is on board with the European Central Bank's stimulus plans and on worries over the escalating situation in eastern Ukraine.

The German central bank Bundesbank will likely back monetary policies including negative rate on bank deposits and packaged bank loans purchases, to tackle exceptionally low levels of inflation in the eurozone.

Meanwhile, international monitors in Kiev has initiated talks to end the crisis in Ukraine, although no representatives of pro-Russian groups were present. The talks included Ukraine's interim leaders and are in line with the OSCE roadmap plan.

Yesterday, seven Ukrainian soldiers were killed in an ambush by the pro-Russian militia near the town of Kramatorsk in Donetsk region, according to Ukraine's Defense Ministry. At least one rebel soldier was also killed in the ambush.

In economic news from the U.S., producer prices rose by more than anticipated in April due partly to a sharp jump in food prices, a report from the Labor Department showed Wednesday.

Gold for June delivery, the most actively traded contract, gained $11.10 percent or 0.9 percent to close at $1,305.90 an ounce on the Comex division of the New York Mercantile Exchange on Wednesday.

Gold for June delivery scaled an intraday high of $1,309.20 and a low of $1,291.60 an ounce.

On Tuesday, gold futures ended marginally lower despite a disappointing report on U.S. retail sales.

Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, remained unchanged from its previous close of 780.46 tons.

The dollar index, which tracks the U.S. unit against six major currencies, traded at 80.06 on Wednesday, down from its previous close of 80.12 late Tuesday in North American trade. The dollar scaled a high of 80.13 intraday and a low of 79.99.

The euro traded higher against the dollar at $1.3708 on Wednesday, as compared to its previous close of $1.3703 late Tuesday in North America. The euro scaled a high of $1.3731 intraday and a low of $1.3698.

In economic news from the U.S., a report from the Labor Department showed producer prices to have risen by much more than anticipated 0.6 percent in April, following a 0.5 percent increase in March. Economists had been expecting producer prices to edge up by about 0.2 percent.

Core producer prices, which exclude food and energy, also showed continued growth, climbing by 0.5 percent in April after rising by 0.6 percent in March. Core prices had been expected to rise by 0.2 percent.

Meanwhile, the Bank of England on Wednesday settled market speculations over an early interest rate hike, indicating it was necessary to absorb the slack in the economy before tightening policy rates. The central bank in its May Inflation Report said policymakers see more scope to make greater inroads into slack before raising the interest rate.

The U.K. unemployment rate dropped to a five-year low in the first quarter, as economic recovery added more jobs and pay growth exceeded consumer price inflation. The ILO jobless rate declined to 6.8 percent during January to March, the lowest since February 2009, from 7.2 percent in October to December, data from the Office for National Statistics showed Wednesday. The rate came in line with expectations.

Eurozone industrial production dropped in March, driven by declines in the output of the big four countries, raising concerns over the strength of the economic recovery in the 18-nation economy. Production shrunk 0.3 percent in March following a 0.2 percent increase in the previous month. This was in line with economists' expectations.

All the big four economies registered declines in output during March, with production falling 0.2 percent in Germany and 0.7 percent in France. Output fell 0.6 percent in Spain and 0.5 percent in Italy.