Gold prices slumped on Tuesday as US Treasury yields hit several-year highs after the Federal Reserve chief’s aggressive inflation stance. However, the intensifying conflict between Russia and Ukraine continues to support prices for the safe-haven metal.
Jeffrey Halley: Gold stuck between two opposite effects
Market experts say sharp moves in the US Treasury market point to the risk of an looming recession, as markets doubt the Fed’s plan for a “soft landing” for the economy as it raises interest rates to fight inflation. Commenting on the markets, OANDA senior analyst Jeffrey Halley said:
There are no new entries to move the price significantly in Asia today. This causes gold to be stuck between high US interest rates and increased risk aversion.
Fed Chairman Jerome Powell said the U.S. central bank will raise interest rates more than usual if necessary to curb inflation, which is “too high”. The benchmark 10-year Treasury yield rose above 2.3% for the first time since May 2019, while the gap between closely-watched two- and 10-year Treasury yields flattened further, a potential sign of an economic downturn.
Risk from Ukraine continues to support gold
However, gold’s decline was slowed when Ukraine said it would not comply with ultimatums from Russia on Monday, after Moscow demanded it stop defending besieged Mariupol. Nicholas Frappell, global general manager of ABC Bullion, comments:
Continuing conflict and supply chain woes in Ukraine are likely to bolster gold, increasing inflationary pressures.
OANDA senior market analyst Craig Erlam, with a similar approach, explains the impact of the Ukrainian invasion and the risks it poses on precious metal prices as follows:
If we see another escalation and sanctions triggering another commodity volatility around Ukraine, these developments will drive significant safe-haven flows into gold, and even inflation hedges.
$1,900 will be the launch pad for gold, according to Rob Lutts
Spot gold traded at $1,927.7, down 0.42% on a daily basis at the time of writing, while US gold futures slid 0.13% to $1,927. Rob Lutts, chief investment officer at Cabot Wealth Management, predicts as rumors of a potential reconciliation drove gold prices down from their highs over the weekend:
The next launch pad for gold will be the $1,900 region.
“This will continue to provide a positive environment for the yellow metal.”
cryptocoin.com by in this news Raphael Bostic, chairman of the Federal Reserve Bank of Atlanta, said Monday that he is open to more aggressive policy tightening and plans six rate hikes for 2022. The market sees a 50-50 probability of a half-point increase in May, with the probability getting higher by June. In a note, Heraeus precious metals analysts highlight the following:
Even if the Fed’s top rate hike forecasts come true, inflation will still be ahead and real interest rates will be negative. This will continue to provide a positive environment for gold in the medium term.
Pablo Piovano: Increase seems capped at $1,950
Open interest on gold futures markets extended the downtrend once again on Monday, with just 83 contracts this time, according to preliminary data from CME Group. Instead, volume is up for the second session in a row, now with around 7.6k contracts.
Market analyst Pablo Piovano notes that Monday’s rise in gold prices came amid a small drop in open interest and a continuation of an uptrend in volume. Against this, the precious metal is poised for more consolidation, at least in the very near term, with the nearest upper barrier around $1,950.
Contact us to be instantly informed about the last minute developments. twitter‘in, Facebookin and InstagramFollow and Telegram and YouTube join our channel!
Disclaimer: The articles and articles on Kriptokoin.com do not constitute investment advice. Cryptokoin.com does not recommend buying or selling any cryptocurrencies or digital assets, nor is Kriptokoin.com an investment advisor. For this reason, Kriptokoin.com and the authors of the articles on the site cannot be held responsible for your investment decisions. Readers should do their own research before taking any action regarding the company, asset or service in this article.
Warning: Citing the news content of Kriptokoin.com and quoting by giving a link is subject to the permission of Kriptokoin.com. No content on the site can be copied, reproduced or published on any platform without permission. Legal action will be taken against those who use the code, design, text, graphics and all other content of Kriptokoin.com in violation of intellectual property law and relevant legislation.