Gold futures retreated on Wednesday, pulling back from near record highs, as most equity bourses across the globe rallied, drawing flows away from perceived havens.
Trading in the precious metal
GC00,
comes as the Russian offensive against Ukraine, which has destabilized the global commodity complex, is in its second week.
April gold
GCJ22,
was trading $50, or 2.5% lower, at $1,993.30 an ounce, following a 2.4% gain Tuesday that took the yellow metal to $2,043.30 — its highest finish in about 19 months. Prices have traded near the record settlement high of $2,069.40 from Aug. 6, 2020.
May silver
SIK22,
was also down by 63.5 cents, or 2.3%, at $26.26 an ounce after tacking on 4.6% on Tuesday.
“So, gold might be edging away from its record highs and stocks firmer, but sentiment can turn negative very quickly,” wrote Fawad Razaqzada, market analyst at ThinkMarkets. “Volatile market conditions are not going anywhere until Putin ends the invasion of Ukraine.”
Over the past two weeks, investors have been fixated on the conflict in Ukraine, which has fueled a surge in commodities, currencies and government debt, as investors weigh the implications of Western sanctions on Russia the global economy.
On Wednesday, however, the fall in gold and silver is partly due to recent developments on the London Metals Exchange, Chintan Karnani, director of research at Insignia Consultants, told MarketWatch. “Traders are scared of a repeat of LME nickel futures situation in the bullion market — hence profit booking.”
Responding to market conditions fed by the Russia-Ukraine war that sent the price of nickel doubling, the LME on Tuesday cancelled all the trades in nickel futures.
Investors also are also reacting to the path of aggressive monetary policy by central banks which have been reacting to the prospects of a surge inflation, a surge that is expected to be amplified by the hostilities in Eastern Europe.
The European Central Bank is scheduled to deliver its latest policy update on Thursday, a week ahead of the key gathering of the Federal Reserve, where Chairman Jerome Powell has said that he will endorse and propose an increase of 25 basis points of benchmark Fed funds futures, likely commencing a series of rate increases to quell inflationary pressures.
Gold’s decline on Wednesday appeared to be limited by a 0.9% drop in the U.S. dollar, as gauged by the ICE U.S. Dollar Index
DXY,
but pressured by a rise in benchmark yields, with the 10-year Treasury note
TMUBMUSD10Y,
yield at 1.92%.
A weaker U.S. dollar can make bullion more appealing for overseas buyers while higher yields can increase the opportunity costs of owning gold, which doesn’t offer a coupon over government debt.
Among other Comex metals Wednesday, May copper
HGK22,
fell 1.5% to $4.641 a pound. April platinum
PLJ22,
lost 3.4% to $1,114.10 an ounce and June palladium
PAM22,
headed down by 0.6% to $2,950.50 an ounce after Tuesday’s 2.3% climb.
