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Metals Stocks: Gold back above $2,000 on Russia-Ukraine war, as annual U.S. inflation rate climbs to a 40-year high

Gold futures traded higher Thursday, finding support as Russia ramped up its attack on Ukraine and a reading on the annual U.S. inflation rate climbed to a 40-year high.

Trading in the yellow metal comes as the some analysts expect the escalation in hostilities in Eastern Europe to result in monetary policy makers advocating for a slower pace of interest rate increases in the region, as the eurozone contends with economic uncertainties tied to Russia’s invasion of Ukraine.

Gold has “great momentum,” said Naeem Aslam, chief market analyst at AvaTrade. “Traders aren’t just sure if they are ready to back riskier assets,” so prices are moving higher.

The Russia and Ukraine situation is the key factor in moving gold prices higher, and geopolitical tensions aren’t likely to ease any time soon, which means much higher gold prices, he told MarketWatch.

Aslam said it’s “reasonable” for the gold price to reach the $2,500 price level. 

In Wednesday dealings, April gold 
GCJ22,
+0.77%

was trading up $17.30, or 0.9%, to $2,005.50, following a 2.7% decline a day ago. Prices on Tuesday settled at $2,043.30, their highest in about 19 months — teasing a record settlement high of $2,069.40 from Aug. 6, 2020.

May silver
SIK22,
+1.93%

climbed by 50.4 cents, or 2%, to $26.32 an ounce.

Meanwhile, gold extended its price gains after the Labor Department reported Thursday that the U.S. consumer-price index hit a 7.9% annual rate in February, with the surge in the cost of living in the past 12 months the biggest since January 1982. The consumer price index rose 0.8% in the month.

Aslam said in an early Thursday note that the inflation reading was “going to act like a double edge sword,” because a “higher inflation reading may bring more interest in gold among traders and investors,” but it also “increases the odds of an aggressive monetary policy approach” from the Federal Reserve.

The European Central Bank on Thursday left key interest rates unchanged, but announced plans to speed up its asset-purchasing program exit. In a press conference, ECB President Christine Lagarde said the Russian invasion of Ukraine will “negatively affect the euro-area economy.”

The ECB’s policy update comes ahead of the Federal Reserve’s expected decision to lift interest rates at the conclusion of its two-day policy gathering on Wednesday.

Rounding out action on Comex, May copper
HGK22,
+1.51%

rose by 1.7% to $4.652 a pound. April platinum
PLJ22,
-1.47%

fell by 0.6% to $1,101.40 an ounce and June palladium
PAM22,
-2.33%

traded at $2,946.50 an ounce, down 0.1%.

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