Gold futures posted their first loss in five sessions on Wednesday, pulling back from near record highs, as most equity bourses across the globe rallied, drawing flows away from perceived havens.
There’s a “general shift in sentiment across asset classes,” said Colin Cieszynski, chief market strategist at SIA Wealth Management. Still, “it’s hard to tell if this is a trading correction or the start of a bigger change,” as markets have been so volatile lately, he told MarketWatch.
Trading in the precious metal GC00, -2.67% came as the Russian offensive against Ukraine, which has destabilized the global commodity complex, is in its second week.
April gold GCJ22, -2.67% fell $55.10, or 2.7%, to settle at $1,988.20 an ounce, following a 2.4% gain Tuesday that took the yellow metal to $2,043.30 — its highest finish in about 19 months. Prices have traded near the record settlement high of $2,069.40 from Aug. 6, 2020.
May silver SIK22, -3.59% also fell $1.08, or 4%, at $25.816 an ounce after tacking on 4.6% on Tuesday.
“Volatile market conditions are not going anywhere until Putin ends the invasion of Ukraine,” wrote Fawad Razaqzada, market analyst at ThinkMarkets.
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.
On Wednesday, however, the fall in gold and silver was partly due to recent developments on the London Metals Exchange, Chintan Karnani, director of research at Insignia Consultants, told MarketWatch. “Traders are scared of a repeat of LME nickel futures situation in the bullion market — hence profit booking.”
Responding to market conditions fed by the Russia-Ukraine war that sent the price of nickel doubling, the LME on Tuesday cancelled all the trades in nickel futures.
Investors also are reacting to plans for aggressive monetary policy paths by central banks, which have been reacting to the prospects of a surge inflation that could be amplified by 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.
Meanwhile, a 1.1% drop in the U.S. dollar, as gauged by the ICE U.S. Dollar Index DXY, -1.01%, appeared to do little to limit the decline in dollar-denominated prices of gold, while a rise in benchmark yields, with the 10-year Treasury note TMUBMUSD10Y, 1.936% yield at 1.94%, contributed to the metal’s losses.
A weaker U.S. dollar can make bullion more appealing for overseas buyers, but higher yields can increase the opportunity costs of owning gold, which doesn’t offer a coupon over government debt.
Among other Comex metals Wednesday, May copper HGK22, -3.03% fell 2.9% to $4.573 a pound. April platinum PLJ22, -4.76% lost nearly 4% to $1,107.60 an ounce and June palladium PAM22, -1.52% edged down by 0.6% to $2,949.80 an ounce after Tuesday’s 2.3% climb.
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