Gold prices retreat from the highest level in a week

Gold prices retreat from the highest level in a week

Gold prices fell on Tuesday, but remained near their highest levels in a week, pending the release of US inflation data for January, which is crucial to the Federal Reserve’s tapering schedule.

This comes with continued fears between Russia and Ukraine, which supported the yellow metal as a safe haven, settling near its highest level in the previous session.

Gold prices rose by about 14 dollars at the close of trading on Monday, to record the highest level in nearly two weeks, supported by fears of accelerating inflation.

Gold Prices Today

The price of gold futures contracts – April delivery – decreased by 0.03%, to reach the level of $ 1821.70 an ounce.

The price of spot delivery of the yellow metal also fell by 0.05%, to record $1822.49 an ounce.

At the same time, the price of silver futures contracts – for March delivery – decreased by 0.79%, recording $22.99 an ounce.

While the spot platinum price rose by 0.98%, to record $ 1034.49 an ounce, and the spot palladium price declined by 0.41%, to record the level of $2255.89 an ounce.

Political Tensions

“Geopolitical tensions surrounding Russia and Ukraine are pushing gold prices higher, and besides that, investors are waiting for US inflation data on Thursday,” said DailyFX strategist Margaret Yang.

It added that inflation is expected to rise in January above December levels, Reuters reported.

According to a Reuters poll, the US consumer price index for January is expected to rise 7.3% annually, the largest such increase since 1982.

US Inflation Data

“US CPI will be the main risk to gold this week…the higher reading is likely to be quite bearish, as traders place higher odds on a Fed tightening,” said DIG Markets analyst Kyle Rhoda.

He added, “The expected $7.3 rise in CPI is a high hurdle to be achieved, so if such a rise is not likely, gold may rise.”

US Bonds

To cap gold’s gains, 10-year US Treasuries held near their highest levels in more than two years.

Gold is a hedge against inflation and geopolitical risks, however, raising interest rates would raise the opportunity cost of holding non-yielding bullion.

US President Joe Biden said on Monday that if Russia invaded Ukraine, the Nord Stream 2 gas pipeline would be stopped, while British Prime Minister Boris Johnson said sanctions and other measures would be ready.

Analysts noted that demand for safe haven assets such as gold helped ease pressure from expectations of a faster US interest rate hike this year.

Interest Rates

Gold prices have been trading around $1800 an ounce since sliding to their lowest level in a month and a half last week, after the Federal Reserve decided to raise interest rates in March to combat inflation risks.

Gold is a hedge against inflation and geopolitical risks, but raising interest rates would raise the opportunity cost of holding non-yielding bullion.

Concerns about the Russian invasion of Ukraine have also kept the demand for the safe haven mineral intact.

It is possible that the challenge posed by high interest rates on the stock markets may end in supporting gold, said Jordan Eliseo, director of listed products and investment research in Perth, Australia.

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