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Gold futures retreated on Wednesday, pulling back from near its all-time high, 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 $18.10, or 0.9% lower, around $2,025.10 an ounce, following a 2.4% gain that took the yellow metal near its highest levels in about 19 months on Tuesday. Prices have traded near the all-time settlement high of $2,069.40 from Aug. 6, 2020.
“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,” wrote the analyst.
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.
Investors also are also reacting to the path of aggressive monetary policy, which has 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 0.5% 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 1.91%.
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.
