Gold slips early Wednesday as palladium climbs, extending a seven-month high, on the worsening conflict between Russia and Ukraine.
The yellow metal, which had rallied this week as a hedge against uncertainty, came under pressure as the U.S. dollar index traded near a 20-month high. A stronger dollar is bearish for gold because it makes purchasing bullion more expensive for holders of other currencies.
But advanced amid fears of worsening supply-chain issues. 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. Russia’s Nornickel Mining Company is the world’s largest supplier of palladium.
Front-month gold futures rose 2.3% Tuesday to $1,943.80 an ounce on Comex and rallied 3% in the first two days of the week. Gold gained 5.8% last month after dropping 1.8% in January, its worst month since September. It retreated 3.5% in 2021. The April contract is currently down $13.10 (-0.67%) an ounce to $1,930.70 and the DG Spot price is $1,924.50.
Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose to 1,042.38 metric tons Tuesday, the highest level since July, Reuters reported.
Spot palladium rose 2.9% Tuesday to $2,578.00 an ounce and has surged 7.7% so far this week. Palladium gained 5.3% last month after rallying 24% in January. It retreated 22% in 2021. Currently the DG spot price is up $53.20 an ounce to $2,604.00.
In the latest developments on Ukraine, U.S. President Joe Biden followed European and other countries Wednesday in banning Russian planes from U.S. airspace and said the U.S. will investigate Russian oligarchs. In his State of the Union address before the U.S. Congress, the American president said that Russian President Vladimir Putin “has no idea what’s coming.”
Meanwhile, Russian paratroopers attacked Kharkiv, in an attempt to take Ukraine’s second-largest city.
In economic news, Fed Chairman Jerome Powell testified this morning to House and senate committees. He said he still sees interest rate hikes ahead but noted that the Ukrainian war are making “implications for the U.S. economy are highly uncertain.” Powell called the labor market “extremely tight” and said inflation has risen well above the Fed’s 2% target.
There are also a series of key economic releases scheduled, including U.S. jobs reports Wednesday, Thursday and Friday.
Investors are watching to see whether the Ukraine crisis will affect plans for an interest-rate hike in March to rein in the high costs of goods and services. The personal consumption expenditures price index, which the Fed uses to track inflation, rose the most year-on-year since 1982 in January, according to data released last week. Biden also pledged to tackle inflation in his speech late Tuesday. High inflation is bullish for gold, though rate increases are bearish.
U.S. manufacturing accelerated in February as demand and supply-chain bottlenecks improved, according to a closely watched report Tuesday from the Institute for Supply Management.
Front-month silver futures advanced 4.8% Tuesday to $25.54 an ounce on Comex and is up 6.4% so far this 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. The May contract is currently off $0.346 (-1.35%) an ounce, down to $25.195 and the DG spot price is $25.17.
Spot platinum increased 1.5% Tuesday to $1,060.90 an ounce and is up 0.2% so far this 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 currently up $9.70 an ounce to $1,067.60.
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