Gold is hedging lower amidst heightened geopolitical risk
Spot gold prices are hedging lower during early Tuesday trading, remaining within the same narrow range of the last few sessions. The precious metal’s appeal as a haven offers investors some comfort, amidst heightened geo-political risk, caused by the ongoing war in Ukraine, and doubts over economic growth prospects, especially in Europe. On the other hand, market expectations that the Federal Reserve will accelerate the pace of tightening, are capping the demand for gold. As treasury yields continue to rise, so does the cost of holding non-yielding bullion, and further bond market weakness is likely to trigger more pronounced losses for gold.
Ricardo Evangelista – Senior Analyst, ActivTrades
European markets traded mixed after gains in Frankfurt, Madrid and Copenhagen offset losses in Milan, London and Paris as investors struggle to assess the impact of different major market drivers.
Risk appetite remains resilient as technical supports are preventing stock benchmarks from drifting even lower while cash continues to rotate from safety to risk, with treasuries and precious metals trading lower as further rate hikes continue to be priced in by the market.
The overall environment remains hard to read as investors’ focus keeps being torn between lingering tensions with Russia, the prospect of an economic downturn brought by flattening yield curves and the sudden hawkish switch from the Fed. On top of this, a Covid resurgence in Asia and Europe could dent demand for a bunch of industries, sparking higher market volatility. After this morning’s EU PMI data, investors are likely to drive their focus towards the US ISM data release due later in the afternoon as well as an awaited speech from Fed Governor Lael Brainard that could provide traders with more hints on what the FED’s next move going into the April meeting might be.
Pierre Veyret– Technical analyst, ActivTrades
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