Gold futures climbed back above the key $2,000 mark on Thursday as Russia ramped up its attack on Ukraine and a reading on the annual U.S. inflation rate climbed to a 40-year high.
Strength in prices for the yellow metal comes as the some analysts expect the escalation in hostilities in Eastern Europe to result in monetary policy makers advocating for a slower pace of interest rate increases in the region, as the eurozone contends with economic uncertainties tied to Russia’s invasion of Ukraine.
Gold has “great momentum,” said Naeem Aslam, chief market analyst at AvaTrade. “Traders aren’t just sure if they are ready to back riskier assets,” so prices are moving higher.
The Russia and Ukraine situation is the key factor in moving gold prices higher, and geopolitical tensions aren’t likely to ease any time soon, which means much higher gold prices, he told MarketWatch.
Aslam said it’s “reasonable” for the gold price to reach the $2,500 price level in the next few months.
On Wednesday, April gold
GCJ22,
rose $12.20, or 0.6%, to settle at $2,000.40, following a 2.7% decline a day ago. Prices on Tuesday settled at $2,043.30, their highest in about 19 months — teasing a record settlement high of $2,069.40 from Aug. 6, 2020.
Read: Gold near record-high prices has become a costly haven for investors
May silver
SIK22,
climbed by 44 cents, or 1.7%, to $26.256 an ounce.
As gold prices firm at higher levels, there may be a “perception shift from a ‘gold bug’,” or speculative position, to a “permanent ‘store of value’ view,” said Patrick Fruzzetti, managing director and partner at Rose Advisors at Hightower.
“There are opportunities in all ends of the market — mining companies and the physical commodity,” he said.
Meanwhile, gold extended its price gains after the Labor Department reported Thursday that the U.S. consumer-price index hit a 7.9% annual rate in February, with the surge in the cost of living in the past 12 months the biggest since January 1982. The consumer price index rose 0.8% in the month.
The CPI data offers “more support for gold,” said Fruzzetti. “But I like to think about gold more as a hedge against the debasement of the dollar. Inflation is a part of that, but not the only factor.”
AvaTrade’s Aslam said in an early Thursday note that the inflation reading was “going to act like a double edge sword,” because a “higher inflation reading may bring more interest in gold among traders and investors,” but it also “increases the odds of an aggressive monetary policy approach” from the Federal Reserve.
The European Central Bank on Thursday left key interest rates unchanged, but announced plans to speed up its asset-purchasing program exit. In a press conference, ECB President Christine Lagarde said the Russian invasion of Ukraine will “negatively affect the euro-area economy.”
The ECB’s policy update comes ahead of the Federal Reserve’s expected decision to lift interest rates at the conclusion of its two-day policy gathering on Wednesday.
It’s fairly clear inflation in the U.S. has not yet peaked, Jeff Wright, chief investment officer at Wolfpack Capital, told MarketWatch.
This leads to the Fed and interest rates, with a 25 basis point rate increase “100% baked in” as it was communicated by Chairman Jerome Powell last week, he said. No rate increase would “signal the U.S. economy is slowing much faster than folks believe and could also panic the market.”
Rounding out action on Comex, May copper
HGK22,
rose by nearly 1.8% to $4.653 a pound. April platinum
PLJ22,
fell by 1.1% to $1,095.20 an ounce and June palladium
PAM22,
settled at $2,920.50 an ounce, down 1%.
Source: https://www.marketwatch.com/story/gold-futures-rise-ahead-of-thursdays-u-s-inflation-report-11646916290?siteid=yhoof2&yptr=yahoo