Gold futures finished higher Wednesday, posting their first gain in four sessions in cautious trading as Russia shelled areas near the Ukraine capital of Kyiv despite an earlier pledge to scale back military options.
“The unpredictability of the Putin regime will mean a hefty risk premium remains in the gold markets until talks have reached a positive conclusion, and arguably, for an extended period after that,” said Stephen Innes, managing partner at SPI Asset Management, in a daily note.
“Gold prices are the most appropriate asset class to watch for any reaction in Ukraine” and their sharp climb from overnight declines suggests that “the market has a cautious take on peace talks,” he said.
Gold for June delivery GC00, +0.90% GCM22, +0.90%, which is the most active contract, rose $21, or 1.1%, to settle at $1,939 an ounce on Comex after losing 1.4% on Tuesday. May silver SI00, +0.97% SIK22, +0.97% climbed 38 cents, or 1.5%, at $25.113 an ounce.
Gold came under pressure Tuesday after the resumption of talks between Russian and Ukraine negotiators. Although the talks produced no breakthroughs, both sides described the talks as constructive and Russia’s military said it would scale back military operations near Kyiv and the northern Ukraine city of Chernihiv.
But optimism soon gave way to skepticism about progress toward a ceasefire. Kremlin spokesman Dmitry Peskov said Wednesday that Russia hadn’t observed anything “really promising” in Ukraine proposals presented in Tuesday’s talks. Ukrainian President Volodymyr Zelensky and U.S. officials, meanwhile, cast doubt on whether any pledge to pull Russian troops back amounted to a shift.
Signs that the peace talks between Russia and Ukraine are making progress had been a driver for the recent partial recovery for equities, said Rupert Rowling, market analyst at Kinesis Money, in a note. But the situation remains very fragile” and the pullback Wednesday in the U.S. stock market is “a sign that investors remain unwilling to expose themselves fully to risk assets and continue to seek the succour of haven assets such as gold.”
Still, a point will soon be reached “when investors may feel the bearish impact of the conflict has been fully priced in, particularly as long as talks over a peaceful resolution continue,” said Rowling. “As a result, the focus will switch back onto the macroeconomic scenario in which the cost of living is rising at the fastest level in decades for many countries.”
While gold has benefited from the rush to safe-haven assets following Russia’s invasion of Ukraine, “any unwinding of those fear trades coupled with central banks hiking rates is likely to see gold fall out of favor,” Rowling wrote.
Gold pared some gains after the ADP National Employment Report showed U.S. private payrolls rose by 455,000 in March, compared with a gain of 450,000 forecasted by economists polled by The Wall Street Journal.
Government data also released Wednesday showed that corporate profits rose in the fourth quarter and hit a record high. Adjusted pretax profits rose 0.7% to an annualized $2.94 trillion in the fourth quarter of last year, versus the third quarter.
Other Comex metals ended higher, with May copper HGK22, +0.23% rose 0.4% to $4.751 a pound. July platinum PLN22, +1.93% added 2.3% to $1,001.20 an ounce and June palladium settled at $2,243.10 an ounce, up 6.2% after Tuesday’s 5.8% loss.
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