Gold futures prices closed higher on Monday (24th), as brewing international tensions and sluggish risk assets supported buying of gold, which is seen as a safe-haven tool.
Adrian Ash, head of research at BullionVault, said: “Gold has clearly benefited from portfolio insurance properties, with the Nasdaq Composite down regarding 15% from its November record high.”
When gold closed Monday, U.S. stocks were lower, with the Nasdaq down regarding 1.9% and the Dow down 1.7%.
- Gold futures for February delivery rose 9.9 Dollaror 0.5%, at 1841.70 an ounce Dollar。
- Silver futures for March delivery fell 52 cents, or 2.1%, to settle at 23.80 an ounce Dollar. It rose 6.1% last week, its biggest weekly gain since May last year.
“Geopolitics is at the top of the market right now as traders and investors have some anxiety regarding the situation,” Jim Wyckoff, senior analyst at Kitco.com, said in a daily note.
“Despite the threat of sanctions by Western powers, Russia appears ready to invade Ukraine,” he said.
The U.S. State Department ordered the families of U.S. diplomats to leave Ukraine over the weekend as fears of a Russian invasion grew, while Washington threatened to impose sanctions if Russia invaded its neighbor. NATO is putting more troops on standby and sending ships and jets to Eastern Europe.
Among other things, the UAE said it had successfully intercepted two missiles fired at its capital Abu Dhabi, and blamed Yemeni Houthi rebels for brewing conflict in the region. Last week Houthi rebels attacked a key oil facility in Abu Dhabi with drones, killing three people.
Meanwhile, the Fed is scheduled to meet on Tuesday and Wednesday to prepare a framework for tightening monetary policy to combat inflationary pressures.
Markets expect the Fed to lay the groundwork for a rate hike this week, currently between 0% and 0.25%, with as many as three hikes expected this year to control inflation.
“A rate hike is usually bad for gold, but the risk of the Fed raising rates too late is exacerbated by the political impossibility of using cheap money to rescue stock market investors,” BullionVault’s Ash said.
High stock market valuations and uncertainty regarding the effectiveness of the central bank’s strategy to fight inflation have kept the market’s appetite for risk curtailed.
“Gold prices rose as investors’ risk aversion increased,” said Ricardo Evangelista, senior analyst at ActivTrades, in Research Daily.
However, Evangelista said that despite the bullish backdrop for gold, the Fed meeting remains a further downside risk for buying, or at least might limit any sharp gains,
With inflation concerns still in place, investors are anxiously awaiting this week’s Fed meeting, “fearing that the Fed will be more hawkish, and if so, there might be more downside risk to risk-related assets. That might be bullish for gold, but may also supportDollar, and the negative correlation between the two assets may limit the upside of gold. “
IHS Markit announced on Monday that the U.S. Services Purchasing Managers’ Index (PMI) fell to 50.9 from 57.6 in the previous month, hitting an 18-month low. Gold extended gains following the data, but then faded.
