Gold prices rebounded again on Wednesday, after the United States (US) said
Russia was still building troops around Ukraine.
Wednesday (16/2), spot gold price closed up 0.9% higher to US$ 1,869.80 per
troi ounce. Similarly, the price of gold futures for April delivery rose
0.8% to US $ 1,871.50 per troi ounce.
"Gold attracts a lot of investors seeking refuge because they realize that
there will be no quick resolution to this situation in Russia-Ukraine
relations," said Edward Moya, senior market analyst at OANDA.
“Gold has a clear path higher. However, it will have some moments where it
will sell as a more aggressive Fed tightens expectations,” Moya continued.
Sentiment that brought gold back to strength was when US Secretary of State
Antony Blinken said that Russia had moved key units closer to the Ukrainian
border, despite Moscow's statement that its troops had withdrawn from the
border.
Rising geopolitical tensions and expectations of a hike in US interest rates
weighed on sentiment in financial markets, prompting investors to seek
safe-haven assets such as gold.
The Fed will begin its tightening cycle at its March meeting with a 25 basis
point hike to the benchmark interest rate, according to a Reuters poll.
"Once the Fed starts raising interest rates and ... if it's sooner than
expected you'll see gold drop, but I don't see gold going down right away,"
said Bernard Dahdah, analyst at Natixis.
An increase in interest rates increases the opportunity cost of holding
non-yielding bullion.
Data released on Wednesday showed US retail sales rebounded sharply in
January, but higher prices could blunt sales impacting economic growth this
quarter.
