Geopolitical uncertainty dominates gold market as prices hold near $1,900
Overnight gold prices pushed to a fresh eight-month high of $1,910.80 an ounce as investors digested news over the weekend that Russia and Belarus announced they would extend their military drills, which were expected to end Sunday.
However, gold prices fell from their session highs following news that France's President Emmanuel Macron proposed summit talks between Russia and the U.S.; however, either side has officially agreed to talks.
Looking ahead, most analysts have said that if geopolitical tensions remain elevated, then gold prices have a good shot of holding gains above $1,900. On the other side of the argument, analysts note that if tensions start to relax, gold prices could easily give up all their recent gains.
April gold futures last traded at $1,898.30 an ounce, roughly unchanged on the day.
In a recent interview with Kitco News, Phillip Streible, chief market strategist at Blue Line Futures, said geopolitical tensions account for about 2% of gold's recent move.
"If tensions start to ease, then gold prices could easily retest support around $1,850," he said.
|Gold price hits June highs as markets reprice a 50-bps move from the Federal Reserve|
Ipek Ozkardeskaya, senior analyst at Swissquote, also said that gold's price action this week will depend on what happens in Eastern Europe.
"The yellow metal could give back the Ukraine-related gains rapidly if there is a sustainable resolution at the border," she said. "Yet, if the things get worse, gold won't hesitate to advance as high as needed, and that includes the possibility of an advance to $2000. But that's not the base case scenario."
However, some analysts are looking past the market uncertainty created between the U.S. and Russia and continue to focus on the inflation threat.
David Song, market strategist at DailyFx.com, said that he thinks gold prices could push to his target of $1,917 an ounce if the Personal Consumptions Expenditures (PCE) Index shows inflation rose more than expected last month.
"Evidence of persistent inflation may generate higher gold prices ahead of the next Fed interest rate decision on March 16," Song said. "It remains to be seen if the central bank will adjust its exit strategy as price growth remains well above the 2% target."
Analysts have said that gold remains an attractive asset if the U.S. central bank remains behind the inflation curve, keeping real interest rates remain in negative territory.