Gold prices recorded the steepest drop in nearly 14 months in the previous session, as the decline in oil prices and the planned diplomatic talks between Russia and Ukraine increased risk appetite.
Jeffrey Halley: Downside pressure on gold continues
Spot gold, after falling as much as 3% on Wednesday, started the day lower on Thursday, but at the time of writing it turned up and was trading at $2,007.58, up 0.73% daily. U.S. gold futures rose 1.17% to $2,011.5. Jeffrey Halley, senior analyst at OANDA, comments:
Undoubtedly, there are many long positions still being squeezed in the last few days. With no new Ukrainian headlines to change the dynamic and Asian stocks rebound strongly, bearish pressure on gold continues.
cryptocoin.com As we have also mentioned in the news, the influx of safe haven assets due to the Ukraine crisis led to an increase of approximately 8.5% in gold prices in the last two weeks, causing gold prices to approach the record levels they reached in August 2020.
“Increasing geopolitical risks and high inflation will support gold”
Asian stocks rallied after planned diplomatic talks between Russia and Ukraine boosted sentiment after Wall Street gains overnight. But in a note, ANZ analysts highlight:
As Russia is an important commodity producer, sanctions intensify the risk of stagflation. We believe that increased geopolitical risks and high inflation will support gold prices.
The sharp rise in oil and other commodities fueled concerns about rising inflation and further shocks to its potential to slow economic growth. Investors are now awaiting US consumer price index data for February later in the day, ahead of the Federal Reserve’s next policy announcement on March 16. Edward Meir, analyst at ED&F Man Capital Markets, said:
Things can’t just keep escalating. At some point, the equilibrium level has to be reached. At some stage, all these commodity prices must discount the fact that no Russian production is coming, no matter what commodity you are talking about.
According to Michael McCarthy we will look for ATH levels for precious metals
Analysts say the reversal was also triggered by taking profits. Stocks rallied as oil prices eased and investors bought stocks that had been battered by concerns about sanctions on Russia. Gold is seen as a safe store of value amid such uncertainties. Michael McCarthy, chief strategy officer for Tiger Brokers, Australia, said:
If the current geopolitical instability continues, we will seek all-time highs for precious metals.
Bart Melek, head of commodity strategies at TD Securities, said:
But we have a much more solid foundation than before this conflict. Mainly because I think the Federal Reserve and other central banks will still be very cautious about how to reduce liquidity.
Pablo Piovano: Gold faces next support at $1,880
Open interest on gold futures markets resumed the bullish trend, with nearly 13.2K contracts rising Wednesday, the biggest single-day increase since February 17, according to preliminary data from CME Group. Instead, volume reversed the three-day increase in a row and shrunk to nearly 100,000 contracts.
Gold prices fell sharply on Wednesday as risk sentiment resumed in global markets. According to market analyst Pablo Piovano, the decline was in the midst of rising open interest, suggesting that extra losses remained in the pipeline. In contrast, the analyst states that the $1,880 area is now emerging as the next major support for the precious metal.
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