Gold Extends Drop Below $2,000 as Risk Appetite Returns

By BLOOMBERG

Gold extended losses, after posting the biggest decline in 14 months, following indications that Ukraine is ready for a diplomatic solution with Russia.

Bullion is paring some of its gains this year as commodity prices slipped following remarks from a top foreign policy aide to President Volodymyr Zelenskiy on Wednesday. The official said Ukraine is open to discussing Russia’s demand of neutrality as long as it’s given security guarantees — though it won’t surrender a “single inch” of territory. 

The two nation’s foreign ministers will meet in Turkey on Thursday.

The precious metal, alongside various other commodities such as oil and wheat, have fallen from recent highs, although concerns remain over the threat of an inflationary shock to the global economy just as the Federal Reserve prepares to raise interest rates. U.S. inflation data released later Thursday will provide the latest gauge for price pressures ahead of the central bank’s meeting next week.

“Investors will continue to buy gold as an inflation hedge,” Georgette Boele, senior precious metals strategist at ABN Amro Bank N.V., wrote in a note. “But as the Fed will continue to hike and we also expect a higher dollar, gold’s fortunes will mainly be positive versus other currencies than the dollar.”

The Dutch lender expects gold prices to reach $2,000 an ounce at the end of 2022 and 2023.

Spot gold fell 0.5% to $1,980.99 an ounce at 9:51 a.m. in London after dropping 2.9% Wednesday, the most since January 2021. Prices touched $2,070.44 on Tuesday, just $5 short of an all-time high reached in August 2020. The Bloomberg Dollar Spot Index rose 0.1% after declining 0.9% in the previous session. 

Palladium, silver and and platinum all fell.