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Bullion had previously extended its steepest decline in 14 months in hopes that talks between the countries’ foreign ministers could lead to a diplomatic solution. However, Ukrainian Foreign Minister Dmytro Kuleba said Russia had indicated it would continue its attacks until its objectives were achieved, a sign of the distance between the two sides.
The lack of momentum on a possible ceasefire has reignited risk sentiment in global markets, supporting gold, which alongside various other commodities such as oil and wheat fell by from its recent highs.
Meanwhile, concerns remain about the threat of an inflationary shock to the global economy just as the Federal Reserve prepares to raise interest rates. US inflation accelerated to a new 40-year high in February ahead of the recent spike in energy prices.
“Investors will continue to buy gold as an inflation hedge,” Georgette Boele, senior precious metals strategist at ABN Amro Bank NV, wrote in a statement. Bloomberg Remark.
“But as the Fed will continue to rise and we also expect a stronger dollar, gold’s fortunes will be mostly positive against non-dollar currencies.”
Jeff Currie, global head of commodities research at Goldman Sachs, believes that gold is currently in an ideal position.
“It’s actually perfect storm gold right now,” Currie said in a Bloomberg interview on Wednesday, citing growing investor demand, central bank buying and strong physical demand last quarter.
“This is the highest demand for the three channels that we have ever seen. The last time we saw this type of demand flow across the board was in 2010-2011, and gold was up 70%,” he said.
“Our goal is $2,500, or $500 more from here.”
(With files from Bloomberg)