Gold futures moved higher Wednesday, on track to post their first gain in four sessions, with traders showing caution as Russia shelled areas near the Ukraine capital of Kyiv despite an earlier pledge to scale back military options.
“The unpredictability of the Putin regime will mean a hefty risk premium remains in the gold markets until talks have reached a positive conclusion, and arguably, for an extended period after that,” said Stephen Innes, managing partner at SPI Asset Management, in a daily note.
“Gold prices are the most appropriate asset class to watch for any reaction in Ukraine” and their sharp climb from overnight declines suggests that “the market has a cautious take on peace talks,” he said.
Gold for June delivery GC00, 1.06% GCM22, 1.06%, which is the most active contract, rose $18.60, or 1%, to $1,936.60 an ounce on Comex after losing 1.4% on Tuesday. May silver SI00, 1.51% SIK22, 1.57% was up 44.9 cents, or 1.8%, at $25.185 an ounce.
Gold came under pressure Tuesday after the resumption of talks between Russian and Ukraine negotiators. Although the talks produced no breakthroughs, both sides described the talks as constructive and Russia’s military said it would scale back military operations near Kyiv and the northern Ukraine city of Chernihiv.
But optimism soon gave way to skepticism about progress toward a ceasefire. Kremlin spokesman Dmitry Peskov said Wednesday that Russia hadn’t observed anything “really promising” in Ukraine proposals presented in Tuesday’s talks. Ukrainian President Volodymyr Zelensky and U.S. officials, meanwhile, cast doubt on whether any pledge to pull Russian troops back amounted to a shift.
“While the war in Ukraine is undoubtedly the key short-term market driver, a point will soon be reached when investors may feel the bearish impact of the conflict has been fully priced in, particularly as long as talks over a peaceful resolution continue,” said Rupert Rowling, market analyst at Kinesis Money, in a note.
“As a result, the focus will switch back onto the macroeconomic scenario in which the cost of living is rising at the fastest level in decades for many countries,” he said.
While gold has benefited from the rush to safe-haven assets following Russia’s invasion of Ukraine, “any unwinding of those fear trades coupled with central banks hiking rates is likely to see gold fall out of favor,” Rowling wrote.
Gold pared some gains after the ADP National Employment Report showed U.S. private payrolls rose by 455,000 in March, compared with a gain of 450,000 forecasted by economists polled by The Wall Street Journal.
Government data also released Wednesday showed that corporate profits rose in the fourth quarter and hit a record high. Adjusted pretax profits rose 0.7% to an annualized $2.94 trillion in the fourth quarter of last year, versus the third quarter.
Other Comex metals traded higher, with May copper HGK22, 0.37% rose 0.6% to $4.758 a pound. July platinum PLN22, +2.52% added 2.1% to $999.60 an ounce and June palladium traded at $2,239 an ounce, up 6% after Tuesday’s 5.8% loss.