Gold hits three-month high early Monday as escalating tensions between Russia and Ukraine made an armed conflict between the two countries more likely.
The yellow metal attracted investors in its traditional role as a hedge against uncertainty. The United States warned Sunday that Russia could invade Ukraine at any time.
The geopolitical uncertainty replaced speculation over interest rates and inflation that has taken center stage in the gold market in recent weeks. Expectations grew last week that a large interest-rate increase was pending after hawkish comments from a Federal Reserve official following last Thursday’s U.S. inflation report. Rate increases are typically bearish for gold because they make the yellow metal less attractive to investors than other assets.
Front-month gold futures rose 1.9% last week to settle at $1,842.10 an ounce on Comex. The metal gained 0.3% Friday. Gold dropped 1.8% in January, its worst month since September. It retreated 3.5% in 2021. The April contract is currently up $23.40 (+1.27%) an ounce to $1,865.50 and the DG spot price is $1,865.80.
Gold imports into India, one of the world’s markets for the yellow metal, dropped about 42% in January from a year earlier, Metals Focus reported. While some industry observers had expected the government to cut its import duty on gold for the 2022 to 2023 fiscal year, the level remained unchanged.
More than 130,000 Russia troops are staged along the Ukraine border, a U.S. official, who spoke on condition of anonymity, said Sunday. U.S. President spoke for about an hour Sunday with Ukrainian President Volodymyr Zelenskyy.
In economic news, St. Louis Fed President James Bullard, who said last week that he would like to see interest rates up a total of 1 percentage point by early July, was scheduled to speak later Monday. Last week, the U.S. January inflation report that showed the biggest year-on-year jump in about four decades. The consumer price index for January showed a 7.5% annual rise, the highest monthly increase since 1982. The data came out Thursday.
The dollar and Treasury yields held gains, adding some pressure to the precious metals market.
March silver futures increased 4% last week to $23.37 an ounce on Comex, though the front-month contract retreated 0.7% Friday. Silver dropped 4.1% in January after gaining 2.4% in December. It fell 12% in 2021. Silver prices are tied to industrial demand. The March contract is currently up $0.491 (+2.10%) an ounce to $23.868 and the DG spot price is $23.90.
Spot palladium fell 4.2% last week to $2,215.00 an ounce after dropping 3.2% Friday. Palladium jumped 24% last month after rallying 9.6% in December. It retreated 22% in 2021. Palladium’s main use is in catalytic converters for gasoline-powered vehicles. The metal is riding high on concerns about a potential supply breakdown from key Russian mines. Currently, the DG spot price has leapt up $133.90 an ounce to $2,346.50.
Spot platinum lost 0.4% last week to $1,027.10 an ounce, and it dropped 1.9% Friday. The metal rose 5.7% in January after gaining 2.9% in December. It lost 9.4% last year. The current spot price is up $19.40 an ounce to $1,045.40.
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