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Metals Stocks: Gold trades near 3-month high as Russia-Ukraine tensions spark demand

Gold futures rose Monday, trading near a three-month high, as fears of a potentially imminent Russian invasion of Ukraine sparked demand for safe-haven assets.

Gold for April delivery
GC00,
+0.72%

GCJ22,
+0.72%

rose $16.40, or 0.9%, to $1,858.50 an ounce. Gold futures ended higher Friday in regular trading, then extended gains in electronic trade to hit a level last seen in November after Jake Sullivan, the White House national security adviser, warned that a Russian invasion of Ukraine could occur “any day now.”

U.S. President Joe Biden and Russian President Vladimir Putin spoke by phone Saturday, but the discussion produced no tangible breakthroughs. The White House said Biden made clear to Putin that an invasion would see the U.S. and its allies impose “swift and severe costs on Russia.” Biden has ruled out sending U.S. combat troops to Ukraine, but has threatened sweeping sanctions against Moscow.

Read: What a Russian invasion of Ukraine would mean for markets as Biden warns Putin of ‘severe costs’

March silver
SIH22,
+1.31%

rose 37.1 cents, or 1.6%, to $23.74 an ounce.

Markets are reacting to the geopolitical fears “by seeking safe-haven assets, in a dynamic that strongly supports the precious metal,” said Ricardo Evangelista, senior market analyst at ActivTrades, in a note.

Upside for gold, however, has been somewhat limited by the other dominant market narrative around persistently hot inflation and expectations for aggressive rate increases and other tightening measures by the Federal Reserve, he said.

“Against such a backdrop the dollar continues to gain ground over other major currencies, limiting gold gains due to the inverted correlation between the two assets,” he said. A stronger dollar can be a headwind for commodities priced in the unit, making them more expensive to users of other currencies.

See: Inflation and armed global conflict have investors worried about Jay Powell’s trigger finger

The ICE U.S. Dollar Index
DXY,
+0.03%
,
a measure of the currency against a basket of six major rivals, was up 0.2% on Monday. Treasury yields had jumped last week on expectations for more aggressive Fed tightening as data showed inflation continued to run hotter than expected. But the demand for havens, including Treasurys, pulled yields off highs.

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