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Metals Stocks: Gold ends lower, marks first weekly decline since January on Russia-Ukraine developments

Gold moved lower on Friday, with prices poised to post their first weekly loss in four, pressured by a higher reading on U.S. inflation as investors keep an eye on the conflict in Eastern Europe.

“There is still risk aversion in the marketplace,” said Jim Wyckoff, senior analyst at Kitco.com, in a note. “However, it can be argued that marketplace anxiety is not as high as it was early Thursday, amid the reports Russia may negotiate.”

Russia said it was willing to send a delegation to Minsk, Belarus, for talks with Kyiv, according to news reports. The news help to ease haven demand for gold.

April gold
GCJ22,
-1.95%

GC00,
-1.95%

was trading $39.80, or 2.1%, lower at $1,886.50 an ounce, following a 0.8% gain for bullion on Thursday. The metal had touched on intraday high on that session at $1,976.50 — the highest for a most-active contract since September 2020, according to Dow Jones Market Data.

For the week, the most-active gold contract was headed for a loss of 0.7%, which would the first weekly loss in four weeks, FactSet data show.

Part of the reason for the pullback in prices is “profit taking after the inability to break past $2,000, Chintan Karnani, director of research at Insignia Consultants, told MarketWatch.

Also, recent “better-than-expected U.S. economic data releases have also calmed the nerves of worried stock traders,” he said. “Everyone is worried about the negative impact of crude oil prices. The safe haven buyer has booked profit in gold.” 

Among the U.S. economic data Friday, the Federal Reserve’s favorite inflation calculator rose by 0.6% in January. The increase in the so-called personal consumption expenditure price index points to still-intense inflationary pressures in the U.S. economy, with the gauge having climbed 6.1% in the past year to mark the fastest rate since February 1982.

A higher reading on inflation “will only encourage the Fed to stick to its plan of raising interest rates this year,” said Naeem Aslam, chief market analyst at AvaTrade, ahead of the data’s release. Given that, higher inflation readings will “likely cap significant upside movement in gold prices because, as interest rates rise, the opportunity cost of holding non-interest-bearing gold also rises, making it less appealing to investors.”

Also Friday, the reading on consumer spending rebounded in January and increased by a sharp 2.1% — more than the 1.6% gain expected by economists polled by The Wall Street Journal.

Meanwhile, orders for durable goods rose 1.6% last month, compared with the 0.8% rise expected by economists.

Despite the day’s pullback, gold enthusiasts see gold holding a compelling case for prospective investors in a diversified portfolio, particularly as the clash in Eastern Europe continues.

On Friday, Russian forces closed in the capital of Kyiv and Ukranian President Volodymyr Zelensky vowed not to surrender the city, which was coming under fire from Moscow.

“With the very real prospect of the situation in Ukraine deteriorating, the case for gold, as the ultimate haven asset that has endured through countless wars over hundreds of years, is very strong,” wrote Rupert Rowling, market analyst at Kinesis Money.

“Indeed a climb up to $2,000 an ounce can’t be ruled out with suddenly all the concerns about gold’s lack of yield against the backdrop of an environment where rising interest rates are forecast is thrown to one side with the primary emotion being fear and concern for what is happening in Ukraine,” he wrote.

In other Comex dealings, May silver
SIK22,
-2.81%
,
which is now the most active, fell 3% to $23.965 an ounce, while May copper
HGK22,
+0.63%

tacked on 0.6% to $4.488 a pound.

April platinum
PLJ22,
-0.24%

lost 0.5% to $1,057.70 an ounce, and June palladium
PAM22,
-5.87%

dropped 5.5% to $2,361 an ounce, after Thursday’s 2.4% climb.

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