International equities remain on tenterhooks the conflict in Ukraine and its effect on the economy, especially its impact on the price of raw materials such as gas and oil.
Russian-backed rebels have accused Ukrainian forces of launching artillery attacks on their territory in violation of agreements aimed at ending the conflict in the disputed area of Donbas. The West has threatened Russia, one of the top palladium producers, with new sanctions if it attacks Ukraine.
Added to that, the expected rate hikes by the US Federal Reserve in March to prevent the highest inflation in 40 years from persisting much longer.
As for the Fed, its authorities agreed at their January meeting that, with more weighty inflation in the economy and solid employment, it was time to tighten monetary policy in the United States, but also that decisions will depend on an analysis meeting by meeting, according to the minutes of the meeting.
Participants agreed that target interest rates would likely need to rise at a “faster pace” than when the Fed last raised them in 2015.
Wednesday also revealed that retail sales increased 3.8% in January, with a strong rebound from the previous month, led by an increase in purchases of motor vehicles and other goods. Economists had forecast a 2% rise.
“If the consumer can absorb, continue to spend and thrive in this inflationary period, that gives the Federal Reserve more room to be aggressive in its monetary policy,” said Keith Buchanan, portfolio manager at Globalt Investments in Atlanta.
Markets are pricing in a 57.5% chance of a 50 basis point hike at the next Fed meeting on March 16 and a 42.5% chance of a 25 basis point hike.
Gold’s rise accelerates: it hits a maximum in eight months
Gold rose this Thursday to a peak in eight months and was approaching the level of $1,900 an ounce. Spot gold rose 1.4% to $1,893.76 an ounce, after hitting its highest level since June 11 at $1,897.41.
US gold futures were up 1.4% at $1,897.80.
“Gold benefited from renewed tensions in Eastern Europe. Palladium is likely to move in a similar fashion, but moves are driven by supply concerns, while gold benefits from its safe-haven status,” said Giovanni Staunovo, an analyst at UBS.
Palladium rose 3.7% to $2,364.76 after hitting a two-week high earlier in the session.
“Gold traders need to worry about the details as it all depends on whether or not Russia attacks,” said Matt Simpson, senior market analyst at City Index.
If Russia invades, gold is likely to rise, but to see a sharp reversal that would send bullion noticeably lower, you would probably need to see Russian troops pouring out of the border, Simpson added.
Among other precious metals, silver was up 1% at $23.78 an ounce and platinum added 2.4% to $1,087.55 an ounce, after hitting a three-month high.
Source: Ambito
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