Metals Stocks: Gold prices end higher, shake off weakness seen after Fed’s Powell signals bigger rate hikes could be in store


Gold futures eked out a gain on Monday after suffering a loss last week, posting only their second gain in seven sessions as investors weighed developments in the Russia-Ukraine and the Federal Reserve’s next moves to help stave off inflation.

“Traders are trying to assess the economic impact of Ukraine in the second quarter and further quarters,” Chintan Karnani, director of research at Insignia Consultants, told MarketWatch. “Hyperinflation and chances of stagflation are the reason for gold price trading over $1,900.” 

Gold prices traded lower for part of Monday’s session after Federal Reserve Chairman Jerome Powell said inflation is “much too high” and left the door open for more than one interest-rate hike of more than 25 basis points this year.

Following Powell’s comments, “the major indices took a quick nosedive while the dollar found support and gold eased off its earlier highs, as yields soared,” said Fawad Razaqzada, market analyst at ThinkMarkets.

The Fed has already signaled a “much stronger appetite to combat inflation, indicating a further six rate increases in 2022, but judging by Powell’s latest comments and those from some of the Fed officials, there is a good possibility that we may even see a 50 basis point increase in May,” said Razaqzada, in a market update.

Gold for April delivery GC00, +0.17% GCJ22, +0.17% on Comex edged up by 20 cents, or less than 0.1%, to settle at $1,929.50 an ounce. The yellow metal declined 2.8%, last week, marking the biggest weekly percentage decline for a most-active contract since the week ended Nov. 26, according to Dow Jones Market Data.

May silver SIK22, +0.93% rose 23 cents, or 0.9%, to $25.313 an ounce. Silver on Friday logged a 4.1% weekly decline, snapping a six-week streak of gains.

The Fed last week delivered a widely expected quarter-point rate increase and signaled it expected to deliver a total of 10 to 11 such hikes through the end of 2023. Some Fed officials have argued for the prospect of lifting rates by a half-point increment in the future.

On Monday, Atlanta Fed President Raphael Bostic said the goal of Fed monetary policy is to get its policy rate up to neutral as quickly as possible. He sees a total of six quarter-point rate increases this year and two more in 2024 to get close to neutral.

Meanwhile, the Ukrainian government refused demands by Russia to surrender the southern port city of Mariupol as Russian forces continued to bombard Ukrainian cities. The demand by Russia came hours after Ukrainian authorities said Moscow’s forces bombed an art school that was sheltering about 400 people.

Stiff resistance has prevented Russian forces from making a quick takeover of the country. The Wall Street Journal reported that senior U.S. officials see signs Russia is adjusting its strategy to secure territorial objectives and use leverage to pressure Kyiv to accept neutrality between Moscow and the West.

The Ukraine war is not likely to lead to a significant impact on global financial markets, unless Russia nears triggering the nuclear option, said Insignia Consultants’ Karnani. “It is the fear of the use of the nuclear option by Putin which is causing a buy on crash strategy among gold traders world-wide.”

He also believes gold prices will “crash or sink, if and when there is news of the Russian central bank selling its gold to meet its local needs.”

In other Comex dealings, May copper HGK22, -0.84% shed 0.6% to $4.711 a pound. April platinum PLJ22, +0.94% added nearly 0.9% to $1,044.70 an ounce and June palladium PAM22, +3.53% settled at $2,537.30 an ounce, up 1.8%.

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