Gold prices are easing off a nine-month high as investors keep a watch on developments in Ukraine.
On Tuesday, gold prices rose to their highest level in over nine months before retreating as investors repositioned near the crucial $1,900 per ounce level as they awaited additional developments in the Ukraine situation.
By 10:47 a.m. ET (1547 GMT), spot gold (XAU=) was down 0.4 % at $1,899.71 per ounce, after hitting a high of $1,913.89. Gold futures in the United States (GCv1) were flat at $1,900.00.
The main indexes on Wall Street began lower as tensions between Russia and Ukraine escalated, while energy stocks rose as oil prices approached $100 per barrel.
After President Vladimir Putin recognized two breakaway territories in eastern Ukraine and ordered the deployment of troops there, the US and its European allies are likely to announce new penalties against Russia.
“Given gold’s typical safe-haven role, it’s not surprising to see it strongly supported in this scenario,” said David Meger, director of metals trading at High Ridge Futures.
However, inflationary pressures have been a primary driver of gold’s performance in its sideways to higher trend over the last several weeks, and interest rate hikes may not overwhelm this trend, according to Meger.
Gold is seen as a safe haven against inflation and political uncertainty. However, interest rate hikes, particularly by the Federal Reserve, have a negative impact on the appeal of bullion, which pays no interest.
The small drop in gold’s price was attributed to profit-taking by analysts. This is “because there is certainly quite an increased risk premium baked into the price of gold at this time,” according to Saxo Bank analyst Ole Hansen.
Meanwhile, spot silver (XAG=) climbed 0.9 % to $24.19 an ounce after hitting a new high of $24.35 for the first time in a month. Palladium (XPD=) dropped 0.15 % to $2,377.50 after reaching a high of $2,433 on Jan. 31.
Platinum (XPT=) was trading at $1,079.50, up 0.5 % .
“Given the growing tensions with (major producer) Russia, it’s understandable that supply chain concerns in the platinum group metals exist,” said High Ridge’s Meger.