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Metals Stocks: Gold ends lower, pressured by strength in the dollar as investors eye Russia-Ukraine developments

Gold futures fell Monday for a second straight session as the U.S. dollar strengthened and investors eyed developments in the Russia-Ukraine war.

“The war in Ukraine continues to provide a steady flow of flight to quality buying interest, but another layer of sanctions on Russia likely infuriates the Russian leader and that could lead to more volatile actions from Russia and more volatility in gold and silver,” analysts at Zaner wrote in Monday’s commentary.

Read: What traders think of U.S.-led efforts to black gold transactions by Russia’s central bank

Gold for April delivery
GC00,
-1.40%

fell $14.40, or 0.7%, to settle at $1,939.80 an ounce on Comex after climbing by 1.3% last week. May silver
SIK22,
-2.05%

lost 42 cents, or 1.6%, to end at $25.196 an ounce, after gaining 2.1% last week.

Ukrainian President Volodymyr Zelensky said he was willing to discuss his country adopting a neutral status and offer security guarantees to Russia to secure peace “without delay.” Zelensky said that neutrality, which would keep Ukraine out of NATO or other military alliances, should be put to Ukrainian voters in a referendum after Russian troops withdraw.

Moscow last week said its focus was now on securing the entire eastern Donbas region, which has been partially controlled by Russia-backed separatists since 2014.

“This positivity that an end can be found to the bloodshed in Ukraine has reduced gold’s appeal as a haven asset,” said Rupert Rowling, market analyst at Kinesis Money, in a note.

Meanwhile, the dollar was stronger versus major rivals, with the ICE U.S. Dollar Index
DXY,
+0.33%

up 0.3%. A stronger dollar can be a negative for commodities priced in the currency, making them more expensive to users of other currencies.

“The dollar has generally been the primary safe haven in recent weeks, but interest in gold, while perhaps somewhat subdued, is still relatively solid,” said Rhona O’Connell, head of market analysis, EMEA & Asia, at StoneX, in a note Monday. “Investor sentiment has remained positive in the face of continued geopolitical risk,” she said.

Treasury yields rose sharply last week, but edged back a bit in Monday dealings. Higher yields raise the opportunity cost of holding nonyielding assets.

“The macroeconomic outlook in which central banks across the world are expected to make a series of interest rate increases over the course of the year will be a perennial headwind to gold’s ability to climb any higher,” Rowling said.

“However, while gold’s upside potential looks limited, the war in Ukraine also provides a firm floor for the precious metal. So while the fact both sides are engaging in talks is a positive sign, until those talks successfully bring an end to the fighting, investors will be unlikely to fully unwind the fear trades placed following Russia’s initial invasion,” he said.

Rowling sees that dynamic likely to hold gold in a range between $1,900 and $2,000 an ounce “for the foreseeable future.”

In other metals trading, May copper
HGK22,
+0.55%

tacked on 0.6% to $4.726 a pound. April platinum
PLJ22,
-2.03%

lost 1.7% to $991.10 an ounce and June palladium
PAM22,
-6.84%

settled at $2,242.40 an ounce, down 6.3%.

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