Gold was little changed near an eight-month high as traders assessed heightened tensions over Ukraine ahead of an expected meeting next week between Russia and the US.
The US said Russia has massed as many as 190,000 personnel — including troops, National Guard units and Russian-backed separatists — in and around Ukraine in what it called the most significant military mobilization since World War II.
Russia has repeatedly denied it plans to attack. US Secretary of State Antony Blinken and Russian Minister of Foreign Affairs Sergei Lavrov have agreed to talk.
Photo: Reuters
The standoff between the West and Russia has increased the appeal of haven assets such as gold. The precious metal posted a third straight weekly gain, its longest run this year, even as the US Federal Reserve is preparing to raise rates, which could damp demand for non-interest bearing gold.
“A rise in Russia risk premium” contributed to the increase in gold prices from the start of this month, TD Securities commodity strategists led by Bart Melek said in a note.
Citigroup Inc analysts, including Aakash Doshi, upgraded their near-term price forecast to US$1,950 an ounce from US$1,825, citing the geopolitical tensions.
Further out, the bank remains bearish, with a target of US$1,750 over six to 12 months as “higher real yields and stronger equities can weigh on bullion prices again.”
“The short-term bid for gold driven by Black Sea military tensions, a spike in risky asset volatility, and inflation hedge demand will need to grapple with an increasingly hawkish Fed and higher policy rates come March,” Doshi said.
Doshi called gold a “pain trade” and noted his bearishness on gold for both the second half of this year and next year, when he has forecast gold would fall to US$1,675 an ounce.
Spot gold on Friday fell 0.1 percent to US$1,896.29 an ounce in New York, after reaching US$1,900.06 during the day.
Bullion for April delivery slipped 0.1 percent to settle at US$1,899.80 on the Comex. The contract rose 3 percent this week.
The Bloomberg Dollar Spot Index on Friday rose 0.2 percent.
Silver gained, while platinum and palladium fell.
GOLD STOCKS
Oil and gas stocks have been the top performers in the US and Canada to start the year, but gold miners are poised to steal that crown this month thanks to a combination of geopolitical risk in Europe and inflationary risk in North America.
In Toronto, where the most large-cap gold and mining stocks are traded, the S&P/TSX Composite Gold Index is up more than 15 percent this month, outperforming the Energy Index by 13 percentage points and the broader market by almost 15 percentage points each.
In the US, Newmont Corp and Royal Gold Inc have led the S&P 1500 Supercomposite Gold Index to a roughly 11 percent return this month, compared with a 3 percent gain for the S&P 1500 Supercomposite Energy Index.
Additional reporting by staff writer
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