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Gold futures on Monday were headed modestly higher, amid a period of factors — including brewing international tensions and a downturn in risk assets — that were supporting buying in the precious metal that is perceived as a haven.
The early move for gold comes as the Federal Reserve was slated to kick off an important gathering on Tuesday and Wednesday to lay out the framework for tightening monetary policy to combat rising inflation pressures.
February gold
GCG22,
GC00,
was trading up $6.20, or 0.3%, to $1,838.10 an ounce, following a 1.1% weekly advance for the precious metal.
Meanwhile, silver for March delivery
SIH22,
was trading 23 cents, or 1%, lower at $24.09 an ounce, after gold’s sister metal put in a weekly advance of 6.1% to end trade on Friday.
Expectations are that the Federal Reserve this week will set the stage for raising interest rates, which currently stand at a range between 0% and 0.25%, as many as three times in 2022 to rein in inflation.
Lofty valuations in stocks and uncertainty about the effectiveness of central bank tactics to combat inflation also have been dragging substantially lower appetite for risk.
Meanwhile, the U.S. State Department over the weekend ordered the families of U.S. personnel to leave Ukraine, as concerns grow about an imminent Russian invasion of Kyiv, with the U.S. threatening sanctions if Moscow invades its neighbor.
On top of that, the United Arab Emirates said it intercepted two ballistic missiles targeting its capital, Abu Dhabi, with Houthi rebels blamed for brewing conflict in the region.
“Gold prices rose during early Monday trading as risk aversion continues to grow amongst investors,” wrote Ricardo Evangelista, senior analyst at ActivTrades, in a daily research note.
Evangelista, however, said that the Fed meeting contains further downside risk for gold buyers, which could at least cap any significant moves higher, despite the bullish backdrop for precious commodities.
“Meanwhile, with inflation remaining a worry, investors are awaiting this week’s Federal Reserve meeting with some concern, fearing a further hawkish tilt by the US central bank, which, if confirmed, would be likely to create more downside for risk related assets,” he wrote.
“This conjecture looks supportive for gold, but it is also supportive of the US dollar and the inverted correlation between the two assets could cap the scope for greater gold gains as risk aversion gains traction on the markets,” the analyst said.
