Gold futures stuck to a tight trading range on Wednesday, with prices holding mostly above the key $1,900 market a day after settling at an eight-month high, as investors assessed the latest development in Eastern Europe between Russia and Ukraine.
An updraft in global stocks and a modest rise in yields appeared to be creating some headwinds for bullion, which had been enjoying an upswing amid intensifying tensions between Moscow and the West over troop deployments into Donbas regions of Ukraine and growing fears of a full-scale invasion of Kyiv.
Some strategists are making the case that the conflict brewing in Ukraine may do less harm to the rest of the world’s economy.
“The U.S. and other nations have slapped sanctions on Russia, but it appears the West has no intention of military action against Russia,” said Jim Wyckoff , senior analyst at Kitco.com, in a daily note. “That has somewhat assuaged the marketplace, for now.”
However, “it’s still a dicey situation, as a military mistake by either side could significantly escalate the conflict,” he said. “The major question on traders’ and investors’ minds is whether the uncertainty/anxiety factor has peaked, from a markets perspective.”
Wyckoff said traders tend to “factor into market prices a worst-case scenario, only to see that scenario typically not occur,” but in this particular geopolitical situation, “another major ‘shoe could drop,’ such as a full-blown Russia invasion of Ukraine, to further destabilize markets.”
Read: Russia’s move into Ukraine is boosting commodity prices — here’s what’s at stake
Against that backdrop, April gold GCJ22, +0.09% GC00, +0.09% edged up by $1.50, or 0.1%, to reach $1,908.90 an ounce, trading between a low of $1,891.10 and a high of $1.909.90. Prices settled Tuesday at $1,907.40, the highest most-active contract settlement since June of last year.
The dollar traded slightly lower, as gauged by the ICE U.S. Dollar Index DXY, +0.03%, and yields for benchmark government debt were headed up, notably the 10-year Treasury note rate TMUBMUSD10Y, 1.975%, which climbed by about 4 basis points.
A weaker dollar should lift appetite for dollar-pegged assets such as gold among overseas buyers but the rise of Treasury yields also can undercut appetite for bullion compared against nonyielding gold and silver.
Meanwhile, the Federal Reserve seems determined to lift interest rates aggressively, as early as next month, to combat a surge in inflation. Such monetary policy moves usually serve as a bearish factor for precious metals.
In other Comex dealings, March silver SIH22, +0.80% tacked on 0.3% to $24.39 an ounce, but March copper HGH22, -0.44% declined by 0.1% to $4.505 a pound.
April platinum PLJ22, +0.42% rose 0.4% to $1,089.90 an ounce and March palladium PAH22, +2.83% climbed 2.1% to $2,422.50 an ounce.
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