Gold price falls after demand for the precious metal was hit by hopes for progress in peace talks between Russia and Ukraine and the impact of the US decision to raise interest rates.
Thus, the US gold futures price lost 0.7% to 1,929.30 USD/ounce.
The speculative bias in gold has cooled massively over the past 10 days as the initial shock from the Russia-Ukraine conflict fades, said David Jones, market strategist at online trading platform Capital.com. , driving demand for this safe-haven asset.
Agreeing with the above statement, analyst Edward Meir of investment brokerage ED&F Man Capital Markets said that if there is a ceasefire or some kind of agreement between Russia and Ukraine, gold prices could fall quite quickly.
In general, the world gold market had a not very “brilliant” week when suffering from many adverse factors. These include the decision to raise interest rates as expected by the Federal Reserve (Fed), the strengthening of the dollar and the peace talks between Russia and Ukraine that recorded positive developments.
In the first session of the week on March 14, gold for April delivery fell $24.2 (1.22%) to $1,960.8 an ounce, thanks to the initial shock from the Russia-Ukraine conflict fading away as officials The two countries started the fourth round of peace talks.
The decline continued in the session of March 15, amid the context of investors waiting for the results of the two-day monetary policy meeting on March 15-16 of the Fed. This session, the price of gold futures trading in the US fell 1.59% to 1,929.7 USD/ounce. In addition, the gold price was under additional pressure when the US Department of Labor announced in February that the producer price index (PPI) increased by 0.8% month-on-month and 10% year-on-year. This is a signal that the highest inflation rate in 40 years is unlikely to cool down in the spring.
On March 16, gold price continued to drop by 20.5 USD (1.06%) and closed at 1,909.2 USD/ounce due to the expectation of the Fed’s first interest rate hike in 2022. The US Federal Open Market Committee (FOMC) on the same day raised the benchmark interest rate by 0.25 percentage points to 0.25 – 0.5%, and signaled more hikes this year.
At the close of the session on March 17, the world gold price increased by 34 USD, or 1.78%, to 1,943.2 USD/ounce, marking the first increase in five sessions, due to concerns about the crisis in Ukraine again. “haunt” the market.
With a decrease in the session on March 18, the world gold price lost 2.8% in the past week, marking the strongest week of decline since November 2021 until now.
Investors see the Fed’s decision to raise interest rates as an obstacle for gold in the short-term, as rising inflation in Europe and the US continues to support demand for the precious metal as a hedge against inflation again.
However, in a recent short report, Standard Chartered analyst Suki Cooper said that the Fed’s rate hike did not reduce the positive sentiment for gold. The expert also noted that current geopolitical risks have increased inflation concerns, sparking longer-term concerns for gold.
Edward Moya, senior market analyst at investment brokerage OANDA, said that the dollar will benefit from rising interest rates and a steady “safe-haven” flow, as investors grow increasingly worried about the impact of the war in Ukraine on inflation and growth.
Gold could then face a rough patch in the short term with key support around $1,900 an ounce.
International markets analyst Carlo Alberto De Casa of precious metals trading platform Kinesis Money said that developments in the Russia-Ukraine conflict and the next decisions of the Fed will be the main drivers for the gold market.
Despite the recent drop, Mr. De Casa said many investors are still bullish on gold and demand for the asset remains strong. Analysts believe that gold will receive support at two levels: the first is around $1,920 an ounce (the peak of gold prices in 2011), and the next is around $1,900 an ounce.
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