Ongoing Ukraine Crisis a Boon for Gold ETFs

Shares of the Market Vectors Russia ETF (NYSEArca: RSX), the largest and most heavily traded Russia ETF, are higher by nearly 2% Monday despite news that the White House has bolstered economic sanctions against Russia by freezing assets of 17 Russian firms.

OAO Rosneft, RSX’s seventh-largest holding at 5.1% of the ETF’s weight, is one of the targets of increased sanctions, but some other RSX holdings, including Gazprom and Sberbank are holding up well Monday. [Russia ETFs Fall After S&P Downgrade]

With the modest strength in Russia ETFs Monday, gold and gold ETFs are trading slightly lower, a sign that the yellow metal’s safe-haven status has gotten a lift from the tensions in Eastern Europe. The SPDR Gold Shares (NYSEArca: GLD) is down half a percent today after gaining almost 1% last week on negative news flow out of Ukraine. [Gold ETFs Could Surpise]

“Escalating Russian aggression towards the Ukraine is causing investors to build their holdings of defensive assets, including gold. Indeed, US long bonds, along with gold have been some of the best investments so far in 2014, highlighting investor anxiety about the potential ramifications from Russian conflict. Gold is also gaining traction as a portfolio diversifier as equity markets have displayed their sensitivity to emerging market headwinds,” according to a new research note by ETF Securities.

Looking at the other precious metals, the ETFS Physical Palladium Shares (NYSEArca: PALL) and the ETFS Physical Platinum Shares (NYSEArca: PPLT) are trading lower Monday, but reaction to news of a possible labor resolution in South Africa may be overdone, according to ETF Securities.

“While a resolution of the strike may cause short term platinum price weakness, an agreement that includes a near doubling of wages would likely accelerate the divestment of major international miners from the more labour-intensive mines in South Africa,” said the research firm.