LONDON: Gold and palladium dampened a searing rally on Wednesday as riskier assets tried to rally, with analysts predicting a further rise in the precious metals should the Ukraine crisis escalate further.
Spot gold fell 1.6% to $2,018.98 an ounce at 12:39 GMT, triggering a four-session rally that brought it within range of the all-time high in August 2020. The contracts US gold futures fell 0.9% to $2,024.00
“What we can see now is just a small correction after such a large move over an extended period (in gold and palladium),” said Craig Erlam, senior market analyst at OANDA.
Major stock indexes rebounded as investors bought battered stocks following a recent rout sparked by fears of mounting Western sanctions against Russia for its invasion of Ukraine.
While gold could retreat from record highs and stocks firm, “sentiment can turn negative very quickly. Volatile market conditions aren’t going anywhere until (Russian President Vladimir) Putin ends to the invasion of Ukraine,” ThinkMarkets analyst Fawad Razaqzada wrote in a note.
Crude oil prices, the strength of which fueled inflation fears and boosted the appeal of gold as a hedge against rising costs, also fell.
Gold could face strong resistance near those highs and a pullback to near $1,930 is likely, with some consolidation around $1,930-$2,075, said Chief Strategy Officer Michael McCarthy. at Tiger Brokers, Australia.
“But if the current instability in geopolitical terms continues, it is very likely that we will seek new all-time highs for precious metals,” McCarthy added.
Palladium, used by automakers in catalytic converters to reduce emissions, fell 2.2% to $3,109.77 an ounce after hitting a record high of $3,440.76 on Monday amid fears disruptions in the supply of the main Russian producer.
Spot silver fell 0.5% to $26.27 an ounce, after hitting a nearly nine-month high on Tuesday. Platinum fell 3.3% to $1,115.39.