Gold settles lower after invasion-linked spike

Gold prices moved in a wide range last week in highly volatile trade in response to the Russian invasion of Ukraine, but finished little changed from the week before.

Prices in London, after climbing as high as $1,968 an ounce on Thursday, retreated sharply on Friday, with the afternoon fixing set at $1,884.80, compared with $1,893.60 a week earlier. Thai selling prices were quoted at 29,150 baht per baht-weight (15.2 grammes), up 300 baht from the previous week.

“We think the price drop is premature, there is a risk of further escalation in the conflict and it could be just a temporary correction,” Commerzbank analyst Daniel Briesemann said after prices fell on Friday.

Some market participants believe the sanctions imposed by the West on Russia are not tough enough, he added.

“The dramatic rise followed by the just as dramatic a fall is very technically motivated,” said David Meger, director of metals trading at High Ridge Futures. A strong rebound in equity markets on Friday also weighed on the safe haven, even as analysts expect volatility to remain elevated.

“The risk premium and safe-haven demand will continue to support gold, but the upside is limited by the possible rate hike by the US Federal Reserve this March,” said Xaio Fu, head of commodity markets strategy at Bank of China International.

In the physical market, Indian dealers offered the highest discounts in 17 months as buyers postponed purchases as prices rallied, with consumers selling jewellery to take profits.

“Demand has dried up. Buyers are waiting for a price correction,” said Harshad Ajmera, a gold wholesaler in Kolkata.

Local gold prices jumped to 52,797 rupees per 10 grammes on Thursday, the highest since August 2020.

Dealers were offering discounts of up to $18 an ounce on official domestic prices, compared with $5.50 a week earlier.

In Hong Kong, dealers charged premiums of $1 to $2.50 as the region witnessed physical gold liquidation and profit taking.