Gold Steady After Biggest Weekly Drop Since June on Fed Liftoff

By BLOOMBERG

Gold was stable on Monday after its biggest weekly drop since June as investors weighed monetary policy tightening in the U.S. against the impact of Russia’s war in Ukraine.

The metal fell 3.4% last week as the Federal Reserve raised interest rates for the first time since 2018. Several officials urged a faster pace of policy tightening to curb the hottest inflation in 40 years.

The Fed will need to raise borrowing costs higher than officials are currently projecting — to 4% to 5% — if it’s to wrestle inflation back under control, former U.S. Treasury Secretary Lawrence Summers said. Elevated interest rates typically weigh on non-interest bearing gold. Chair Jerome Powell will address the annual meeting of the National Association for Business Economics Monday.

Traders are also weighing mixed messages on the war. Ukraine rejected a Russian demand to surrender the embattled port city of Mariupol, and an adviser to the Ukrainian president said Russian forces are using “more destructive artillery.” 

Further talks on ending the war are expected on Monday after Turkey said the two sides had made progress. Gold — a haven asset — has been aided by the conflict and the resulting threats of accelerating inflation and slowing growth. 

“The main fundamental driver that is still supporting gold prices to potentially trade higher in the medium term continues to be the stagflation risk,” said Kelvin Wong, an analyst at CMC Markets in Singapore. “The Fed has so far failed to cool down future inflationary expectations.”

Spot gold rose 0.1% to $1,923.89 an ounce as of 9:50 a.m. in London. The Bloomberg Dollar Spot Index rose 0.1%. Silver was stable as platinum and palladium advanced.