Gold Gains on Ukraine War and Inflation

Gold Gains on Ukraine War and Inflation

Gold gains on continuing concerns over the Ukraine war and strong inflation, despite strong Treasury yields pressuring the precious metal.

Federal Reserve comments early this week indicating that central bank policy makers might be open to more aggressive interest rate hikes to combat inflation sent Treasury yields soaring. Higher interest rates are typically bearish for gold because other assets become more attractive to investors.

Meanwhile, Western countries were poised to announce additional sanctions against Russia for its invasion of Ukraine, including against members of the Russian Duma, or legislature. The moves are expected Thursday, when U.S. President Joe Biden is in Europe. He’s set to travel to Brussels and Warsaw for meetings with Group of Seven, NATO and European Union allies.

Front-month gold futures fell 0.4% Tuesday to $1,926.70 an ounce on Comex, and the June contract dropped 0.4% in the first two days of the week. Gold advanced 5.8% last month after losing 1.8% in January, its worst month since September. It retreated 3.5% in 2021. The April contract is currently up $6.40 (+0.33%) an ounce to $1,935.70 and the DG spot price is $1,936.80.

The world’s largest gold-backed ETF, SPDR Gold Trust, had its holding hit the highest point since March 2021 this week.

After announcing a quarter-percentage point interest rate hike last week, Fed Chairman Jerome Powell said this week that policymakers are prepared to increase them by a half percentage point at the next meeting if necessary.

European Central Bank President Christine Lagarde said Tuesday that there are signs that cryptocurrencies are being used by Russians to bypass sanctions implemented because of the war in Ukraine. ECB Executive Board Member Fabio Panetta called for strict standards governing crypto assets to combat possible money laundering.

Investors will be looking for further direction from comments Wednesday from Powell and Bank of England Governor Andrew Bailey.

The precious metals markets also got a boost from a new wave of COVID-19 infections from the omicron subvariant called BA.2. Cases are expected to begin climbing in the U.S. in coming weeks.

Front-month silver futures retreated 1.6% Tuesday to $24.90 an ounce on Comex and fell 0.7% in the first two days of the week. Silver surged 8.8% in February after dropping 4.1% in January. It fell 12% in 2021. Silver prices are tied to industrial demand. Currently, the May contract is up $0.341 (+1.37%) an ounce to $25.245 and the DG spot price is $25.19.

Spot palladium slid 3% Tuesday to $2,510.50 an ounce and is down 0.4% so far this week. It touched a record $3,440.76 earlier this month. Russia produces about 40% of the world’s palladium, and the metal’s main use is in catalytic converters for gasoline-powered vehicles. There are already vehicle shortages and price increases for automobiles, and Russia’s Nornickel is the world’s largest supplier of palladium. The metal gained 5.3% last month after rallying 24% in January. It retreated 22% in 2021. Currently, the DG spot price is up $43.00 an ounce currently to $2,544.50.

Spot platinum decreased 1.6% Tuesday to $1,030.80, and it lost 0.8% in the first two days of the week. The metal advanced 1.7% in February after rising 5.7% in January. It lost 9.4% last year. The DG spot price is up $5.20 an ounce to $1,033.30, currently.


Disclaimer: This editorial has been prepared by Dillon Gage Metals for information and thought-provoking purposes only and does not purport to predict or forecast actual results. This editorial opinion is not to be construed as investment advice or as a recommendation regarding any particular security, commodity or course of action. Opinions expressed herein cannot be attributable to Dillon Gage. Reasonable people may disagree about the events discussed or opinions expressed herein. In the event any of the assumptions used herein do not come to fruition, results are likely to vary substantially. It is not a solicitation or advice to make any exchange in commodities, securities or other financial instruments. No part of this editorial may be reproduced in any manner, in whole or in part, without the prior written permission of Dillon Gage Metals. Dillon Gage Metals shall not have any liability for any damages of any kind whatsoever relating to this editorial. You should consult your advisers with respect to these areas. By posting this editorial, you acknowledge, understand and accept this disclaimer.