On Friday, gold prices slumped as safe-haven demand for the precious metal slumped after Russian President Vladimir Putin said progress in talks with Ukraine and US interest rate hike prospects weighed on bullion.
“Many positive fundamental factors still exist for gold”
cryptocoin.com As reported in his news, Vladimir Putin said during his meeting with his Belarusian counterpart Aleksandr Lukashenko, “There are some positive changes, as negotiators on our side told me,” but did not give any details.
Spot gold closed the week down 0.44% at $1,987.74 but managed to gain around 0.8% weekly as concerns over the Ukraine conflict kept investors on their toes. U.S. gold futures, on the other hand, were last traded at $1,985, down 0.77%. Saxo Bank analyst Ole Hansen comments in a note:
The Russia-Ukraine crisis will continue to support higher precious metal prices. Because that means higher inflation, slower growth and less central bank rate hikes.
With US inflation ballooning in February, bets that the central bank will raise the benchmark overnight rate by at least 25 basis points on March 16 stood at 94%, according to CME’s FedWatch Tool. David Meger, director of precious metals operations at High Ridge Futures, comments:
Many positive fundamental factors still remain for gold, such as inflation and supply chain disruption.
“The effect of interest rate hikes and the strengthening of the dollar will be limited to the short term”
Benchmark US 10-year Treasury yield rose on the day, raising the opportunity cost of holding non-yielding bullion. However, gold continues to benefit from safe-haven investment flows. According to ANZ Bank economists, the Ukraine conflict could increase the safe-haven appeal of gold investments. Economists evaluate the developments as follows:
Increasing geopolitical and economic risk makes the background for gold increasingly supportive in the short term. The effect of the Fed’s rate hikes and the strengthening of the dollar will be limited in the short term. Higher gold prices could weaken physical output in the Asian market.
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