Gold up as Ukraine fighting boosts safe-haven demand

By Seher Dareen

(Reuters) – Gold prices rose on Monday as fighting in Ukraine boosted demand for safe-haven bullion, while investors kept a close tab on Moscow-Kyiv peace talks.

Spot gold XAU= rose 0.61 % to $1,932.71 per ounce by 10:56 a.m. ET (1456 GMT). U.S. gold futures GCv1 rose 0.3% to $1,934.30.

“Another escalation around Ukraine will drive significant safe haven flows to gold, even inflation hedge moves if we see sanctions that trigger another commodity surge,” said Craig Erlam, senior market analyst at OANDA.

Russia and Ukraine were nearing agreement on “critical” issues, Turkey’s foreign minister said on Sunday, but demand for riskier assets retreated and oil prices climbed as fighting continued in Ukraine. MKTS/GLOB O/R

Last week, gold shed more than 3% on hopes for progress in the talks and a U.S. interest rate hike.

“As real interest rates creep up, appetite for gold as an inflation hedge could diminish,” analysts at Heraeus precious metals wrote in a note.

Atlanta Federal Reserve Bank President Raphael Bostic said on Monday he was open to more aggressive policy tightening, while pencilling in six rate hikes for 2022.

“However, even if the Fed’s upper estimates of rate raises become reality, inflation will still be ahead, and real interest rates negative, maintaining a positive environment for gold in the medium term,” Heraeus analysts said.

Spot silver XAG= rose nearly 1% to $25.19, platinum XPT= was up 1.8% to $1,040.07, and palladium XPD= rose 2.4% to $2,550.97.

The Ukraine conflict coupled with COVID-related restrictions in semiconductor fabrication hubs in China could hurt automotive demand for metals such as palladium, used as an autocatalyst in vehicle exhausts to curb emissions, Heraeus added.