Gold extended a decline amid a rebound in stock markets as investors remained on edge while assessing the impact of Russia’s invasion of Ukraine and Western sanctions.
US equities rose as mixed economic data and uncertainty due to Russia’s attack on Ukraine caused traders to pull back on bets that the US Federal Reserve would aggressively hike interest rates next month.
The prospect of talks between Russia and Ukraine was cast into doubt as the Kremlin said that Kyiv stopped responding after rejecting Moscow’s initial offer to meet in the Belarus capital, Minsk.
Gold traded lower on Thursday after earlier touching its highest price since September 2020.
Gold’s turnaround was due to “a combination of a heavy overbought market running out of momentum ahead of [US]$2,000, fears Russia would need to sell gold to prop up the ruble and [US] President [Joe] Biden’s sanctions underwhelming the market in terms of impact,” said Ole Hansen, head of commodity strategy at Saxo Bank A/S.
Meanwhile, Fed officials signaled that they remain on track to raise interest rates next month.
They stressed the need to confront the hottest US inflation in 40 years, despite uncertainty posed to the global economy by the Russia-Ukraine conflict.
Higher rates could weigh on non-interest bearing gold.
Hansen remains bullish on gold, as inflation would remain elevated and central banks might struggle to slam the brakes hard enough amid the risk of an economic slowdown.
“The Russia-Ukraine crisis will continue to support the prospect for higher precious-metal prices, not only due to a potential short-term safe-haven bid which will ebb and flow, but more importantly due to what this tension will mean for inflation [up], growth [down] and central banks’ rate hike expectations [fewer],” Hansen said.
Spot gold fell 0.8 percent to US$1,888.54 an ounce in New York on Friday.
Bullion for April delivery fell 2 percent to settle at US$1,887.60 on the Comex.
The Bloomberg Dollar Spot Index fell 0.4 percent.
Silver and platinum edged lower, while palladium fell following big swings in the previous session on concerns of potential supply disruptions.
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