Gold climbs from lowest price since April 2020 as Russia escalates war in Ukraine

By Myra P. Saefong and William Watts

Gold found minimal safe-haven buying interest on Wednesday after Russian President Vladimir Putin ordered reservists to mobilize and made remarks seen as a threat to use nuclear weapons, while that he was intensifying the war in Ukraine.

But the rise remained limited as investors awaited the conclusion of a Federal Reserve policy meeting that is expected to see interest rates rise another 75 basis points, or 0.75 percentage points.

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Putin ordered a partial mobilization of the reserves and warned the West that he was not bluffing by using “all the instruments of the [Russia’s] provision” to protect Russian territory, in what was seen as a veiled reference to Russia’s nuclear capability.

“President Putin’s partial mobilization announcement rocked markets this morning as investors expected the main event to focus on [Wednesday’s] FOMC update,” said William Masters, senior trader at Saxo Markets UK. Gold and the dollar rallied on a flight to heaven, he said.

Gold’s gains, however, were relatively modest. A stronger dollar weighed on commodity prices, along with a strong upward push in Treasury yields. A stronger dollar makes commodities priced in unity more expensive for users of other currencies, while higher yields increase the opportunity cost of holding non-performing assets.

See: 4 things to watch when the Fed makes its interest rate decision

“Most likely, investors are holding back a significant adjustment in their positions ahead of the outcome of the Fed meeting, which will be followed tomorrow by decisions from the Bank of Japan, Bank of England and Swiss National Bank,” said Raffi Boyadjian, Head of Investments. analyst at XM, in email comments. “So unless there are new developments in Ukraine, geopolitics will likely play second fiddle to Fed policy.”

The Fed will announce its monetary policy decision at 2 p.m. Eastern Time, about half an hour after gold futures settle for the day’s session.

Gold futures had settled on Tuesday at their lowest since April 2020, under pressure from “aggression by the Fed, as well as other central banks including the Bank of England and more recently the European Central Bank and [Sweden’s] Riksbank,” Rupert Rowling, market analyst at Kinesis Money, said in market commentary.

To put the current scenario into context, the expected outcome of a third consecutive 75 basis point hike by the Fed would be seen as the conservative option when just a few months ago it would have been the one of the biggest hikes in the history of the U.S. central bank,” he said. For now, “gold languishes comfortably below $1,700 an ounce and it’s hard to see where the near-term drivers will come from to push it up significantly.”

–Associated Press contributed to this article.

Hear Ray Dalio at the Best New Ideas in Money Festival on September 21-22 in New York City. The hedge fund pioneer has a strong opinion on the direction the economy is taking.

-Myra P. Saefong

 

(END) Dow Jones Newswire

09-21-22 0955ET

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