Gold Rises on Inflation, Ukraine

Gold Rises on Inflation, Ukraine

Gold rises in Monday morning trading on bullish sentiment over the war in Ukraine and concerns over inflation.

The Ukraine war has brought back some haven investors even as the dollar traded near two-year highs in expectation of aggressive interest-rate increases from the Federal Reserve triggered by high inflation. A stronger dollar is typically bearish for gold, because it makes the metal more expensive for holders of other currencies.

Front-month gold futures rose 1.1% last week to settle at $1,945.60 an ounce on Comex after the June contract increased 0.4% Friday. Gold advanced 2.8% in March after gaining 5.8% in February. It gained 6.9% in the first quarter and retreated 3.5% in 2021. Currently, the June contract is up $21.20 (+1.09%) an ounce to $1,966.80 and the DG spot price is $1,956.60.

The London Bullion Market Association reported Friday that the amount of gold held in London vaults gained 0.3% last month to 9,669 metric tons and was valued at a record $603.8 billion, the equivalent of 773,549 gold bars.

Discounts on Indian physical gold widened as demand increased only slightly, Reuters reported, though purchases in top consumer China remained steady despite COVID-19 related lockdowns.

In Ukraine, Russian forces escalated attacks on several towns in the eastern part of the country Sunday in what observers are calling a new phase in the war that may include a full-scale military confrontation on open terrain. Ukraine has asked allies in the West for weapons and military support.

Last week’s release of the minutes of the March meeting by Fed policymakers — and the support by many of them for a half-percentage point interest-rate increase in coming months — has given further support to the dollar and Treasury yields and pressured gold. The Fed increased rates by a quarter percentage point at the meeting in mid-March, the first rate hike in more than three years.

Key U.S. inflation data for March is due out Tuesday, and Fed officials are scheduled to speak throughout the week. Investors will be watching closely for indications on their future actions.

Gold also continued to attract haven investors because of the spread of coronavirus omicron variant BA.2.

Palladium is experiencing an extremely volatile day. Early morning trading saw a 5% jump for the PGM to over a two-week high. The surge was powered by the recent ban on trading of Russian-sourced metal in the London hub. Palladium climbed 4.1% to $2,526.19 per ounce, nearing its March 24th peak of $2,550.58. The metal then retreated from all of its early gains, tipping into negative territory, but now it has regained ground. Currently, the DG spot price is up $16.90 an ounce to $2,467.00.

Front-month silver futures increased 0.7% last week to settle at $24.82 an ounce on Comex after the May futures contract advanced 0.4% Friday. Silver gained 3.1% in March after surging 8.8% in February. It rose 7.6% in the first quarter after falling 12% in 2021. Silver prices are tied to industrial demand. Currently, the May contract is solidly up $0.702 (+2.83%) an ounce to $25.525 and the DG spot price is $25.15.

The LBMA reported that silver stockpiles in London vaults fell 2.1% last month to 34,462 metric tons, valued at $27.5 billion, or almost 1.15 million silver bars.

Spot platinum fell 0.9% last week to $983.00 an ounce, though it gained 1.3% Friday. The metal dropped 4.2% in March after advancing 1.7% in February. It increased 2.9% in the first quarter after dropping 9.4% last year. The DG spot price is currently up $1.90 an ounce to $985.50.


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