Gold contracts rose in price on Monday, reaching about 3-month highs, as concerns about a possible Russian invasion of Ukraine increase the demand for safe-haven assets.
"The late last week statements by US officials that a Russian invasion of Ukraine is imminent led to sharp fluctuations in the markets," said David Russell, director of marketing at GoldCore. There was a massive sell-off in equity markets as oil prices continued to rise, "giving gold prices momentum to break through resistance in the $1855-$1860 an ounce area," he said.
On Monday, gold purchases continued, however, "any easing of rhetoric around the Ukrainian-Russian situation will definitely contribute to the return of demand for shares (in the short term) and may limit the upside potential of oil quotes," and gold prices may return to levels below resistance, Russell said. . "Further escalation of tension will certainly support gold quotes," the expert added.
Gold prices kept gains after Russian Foreign Minister Sergei Lavrov, at a meeting with Russian President Vladimir Putin, said that Moscow should continue negotiations with NATO and the European Union.
April COMEX gold contracts closed up $27.30, or 1.5%, at $1,869.40 an ounce after hitting $1,872.80 an ounce earlier Monday. The most actively traded gold futures reached their closing high since Nov. 17, according to FactSet data.
A close above $1865-$1870 an ounce would have traders targeting $1,900 an ounce, but "Gold will be sensitive to sentiment on the back of the fast-paced news," Russell warned.
As a result of the face-to-face session on Friday, metal prices rose, and during electronic trading, they continued to rally and reached a maximum since November. Growth was boosted by a statement by US national security adviser Jake Sullivan that Russia could invade Ukraine "any day."
On Sunday, US President Joe Biden and Russian President Vladimir Putin held telephone conversations, but no important agreements were reached. According to White House reports, Biden made it clear to Putin that a potential invasion of Ukrainian territory would come at a serious cost to Russia. Biden said he had no plans to send combat troops to Ukraine but warned of possible sanctions against Moscow.
March silver rose 48 cents, or 2.1%, to $23.848 an ounce.
Markets are reacting to fears of geopolitical tensions, with investors "buying safe-haven assets that support gold prices," said Ricardo Evangelista, senior market analyst at ActivTrades.
Meanwhile, the upside potential for gold prices is somewhat limited due to persistently high inflation, expectations of a strong interest rate hike, and the introduction of other measures to tighten the Fed's monetary policy, he added.
"In this situation, the dollar continues to rise against other major currencies, limiting the upside potential of gold prices, as the US currency and this precious metal are inversely related," Evangelista said. The strengthening of the dollar could become an obstacle to the growth of quotations of commodities denominated in the US currency, making them more expensive for holders of other currencies.
The ICE Dollar Index, which tracks the US dollar against a basket of six other currencies, was up 0.2% as of this writing on Monday. Treasury bond yields jumped last week on expectations of a more active tightening of the Fed's monetary policy, as data pointed to higher-than-expected inflation in the US. The 10-year yield hit 1.999% on Monday, up from 1.951% at 2000 GMT on Friday.
Meanwhile, March COMEX copper futures closed up less than 0.1% at $4.508 a pound. April platinum futures rose 0.9% to $1,028 an ounce. March palladium futures rose about 7.0% to $2,346 an ounce.