Gold climbs as Russia risks outweigh rate hike concerns

Gold climbed on Monday as geopolitical concerns surrounding Russia drew some investors into the safe haven, outweighing pressure from a hawkish interest rate outlook.

Spot gold rose 0.43% to $1,929.54 per ounce by 0951 GMT, while gold futures were up 0.5% at $1,939.90.

Bullion slumped nearly 2% in the previous week as hawkish comments from Federal Reserve officials signalled more rate hikes to tame sticky inflation.

“The markets are trying to adjust to the heightened geopolitical worries that unfolded in Russia this weekend,” said Ole Hansen, head of commodity strategy at Saxo Bank.

Heavily armed Russian mercenaries withdrew from the southern Russian city of Rostov on Sunday under a deal that halted their rapid advance on Moscow.

Meanwhile, markets saw 72% chance of a rate hike in July, with cuts seen from 2024 onwards, according to CME Fedwatch tool.

“The market is somewhat lukewarm about fully pricing in two hikes and… we have found some additional support down towards that $1,900 psychological level,” Hansen said.

Higher interest rates make non-yielding gold less appealing.

The dollar index edged 0.2% lower, making gold cheaper for holders of other currencies, while competing safe-haven asset Treasury yields declined to a two-week low.

But the dollar hit a 15-month high against the rouble after dramatic weekend events in Russia.

Speculators raised their net log position in COMEX gold by 1,322 to 94,626 in the week ended June 20, CFTC data showed on Friday.

Spot silver and platinum were both up 1.4% at $22.72 and $930.25 per ounce, respectively.

Auto-catalyst material palladium rose 1.6% to $1,306.37.

“We expect the downtrend to continue (in palladium)… but also note the increasing short squeeze risk in the event of any supply disruption or demand surprise to the upside,” Citi analysts wrote in a note.