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Gold Jumps as US Sanctions on Russia Reintroduce Political Hedge

Commodities Apr 15, 2021 02:50PM ET
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By Barani Krishnan

Investing.com - Geopolitics: A term almost forgotten in the gold market over the past pandemic year made a dramatic comeback Thursday as sweeping U.S. sanctions on Russia triggered demand for the yellow metal from those seeking a hedge to the growing crisis between the two world powers.

Plunging U.S. bond yields also led to a ramp up in long positions of gold as market participants bet the precious metal would recover its footing as an inflation hedge amid the trillions of dollars in stimulus spending already underway or being planned by the Biden administration.

Benchmark gold futures on New York’s Comex settled up $30.50, or 1.8%, at $1,766.80 an ounce. It earlier scaled a seven-week high of $1,770.35, making its first return to $1,770 pricing since Feb. 26.

The spot price of gold wasn’t far from futures, trading up $30.20, or 1.7%, at $1,766.58 by 1:56 PM ET (17:56 GMT), after a peak at $1,769.64. Moves in spot gold are integral to fund managers, who sometimes rely more on it than futures for direction.

“I had people calling to buy gold for two reasons today: The first is the sanctions and the other was the plunge in bond yields,” said Phillip Streible, market strategist for precious metals at Chicago’s Blue Line Futures.

The Biden administration targeted Russia with sweeping sanctions and diplomatic expulsions Thursday, punishing Moscow for its interference in the 2020 U.S. election, its SolarWinds cyberattack and its ongoing occupation and "severe human rights abuses" in Crimea.

The announcement is one of a series of dramatic foreign policy steps that President Joe Biden has taken this week. Along with his decision to withdraw all troops from Afghanistan and send an unofficial delegation to Taiwan to express support for its democracy and security, the president has signaled what may be a turn toward a tougher, more pragmatic global posture for the U.S.

Prior to Thursday, the last time gold prices reacted to a geopolitical situation was during the January 2020 assassination of Qasem Soleimani, Iran’s top general, who was killed in a U.S. strike ordered by Biden’s predecessor Donald Trump.

The breakout of the Covid-19 after the Soleimani assassination whittled down international conflicts to almost zero for the rest of 2020, until the November killing of nuclear scientist Mohsen Fakhrizadeh — again, an Iranian — in a hit linked to Israeli forces. That incident barely made a ripple on the gold market.

Since Biden came to office in January, new U.S.-Russia rumblings have begun and tensions have escalated in the Middle East involving Iranian, Saudi, Turkish and Israeli actors. None had made a material impact on gold until these White House sanctions on Moscow.

U.S. bond yields, measured by the 10-year Treasury note, plunged to 1.54% from a 14-month high of 1.77% on March 30. That reasserted gold’s position as an inflation hedge, some traders said.

A stronger dollar on Thursday did not weigh on gold, as it typically would. The Dollar Index, which pits the greenback against the euro and five other major currencies, hovered at 91.70 versus Tuesday’s at 91.67.

Gold had a scorching run in mid-2020 when it rose from March lows of under $1,500 to reach record highs of nearly $2,100 by August, responding to inflationary concerns sparked by the first U.S. fiscal relief of $3 trillion approved for the coronavirus pandemic.

Breakthroughs in vaccine development since November, along with optimism of economic recovery, however, forced gold to close 2020 trading at just below $1,900.

Since the start of this year, gold has had more headwinds as the dollar and bond yields often surged on the argument that U.S. economic recovery from the pandemic could exceed expectations, leading to fears of spiraling inflation as the Federal Reserve kept interest rates at near zero.

Gold’s weakness of late was even more remarkable if considered from the perspective of the additional Covid-19 relief of $1.9 trillion passed by Congress in March, and the Biden administration’s plan next for an infrastructure spending bill of $2.2 trillion.

The dollar debasement from these stimulus measures should have sent gold rallying as an inflation hedge. But the opposite has often happened.

Gold Jumps as US Sanctions on Russia Reintroduce Political Hedge
 

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Comments (19)
Walter Topher
Walter Topher Apr 16, 2021 4:39AM ET
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𝚑𝗈𝗐 𝖽𝗈𝖾𝗌 𝗅𝗂𝖿𝖾 𝖿𝖾𝖾𝗅 𝗐𝗁𝖾𝗇 𝗆𝗈𝗇𝖾𝗒 𝗂𝗌 𝗇𝗈𝗍 𝖺𝗇 𝗂𝗌𝗌𝗎𝖾? 𝘄𝗁𝖺𝗍 𝗂𝗌 𝗂𝗍 𝗅𝗂𝗄𝖾 𝗍𝗈 𝗁𝖺𝗏𝖾 𝖺𝗅𝗅 𝗒𝗈𝗎𝗋 𝖻𝗂𝗅𝗅𝗌 𝖺𝗇𝖽 𝖽𝖾𝖻𝗍𝗌 𝗉𝖺𝗂𝖽 𝗂𝗇 𝖿𝗎𝗅𝗅? 𝘄𝗁𝖾𝗇 𝖼𝖺𝗇 𝗒𝗈𝗎 𝖽𝗈 𝗐𝗁𝖺𝗍 𝗒𝗈𝗎 𝗐𝖺𝗇𝗍, 𝗐𝗁𝖾𝗇 𝗒𝗈𝗎 𝗐𝖺𝗇𝗍? 𝘁𝗁𝖾𝗋𝖾 𝗂𝗌 𝗇𝗈 𝗇𝖾𝖾𝖽 𝗍𝗈 𝗐𝗈𝗇𝖽𝖾𝗋 𝖺𝗇𝗒𝗆𝗈𝗋𝖾. 𝘁𝗁𝗂𝗌 𝖺𝗉𝗉 𝗂𝗌 𝗍𝗎𝗋𝗇𝗂𝗇𝗀 𝗈𝗋𝖽𝗂𝗇𝖺𝗋𝗒 𝗉𝖾𝗈𝗉𝗅𝖾 𝗂𝗇𝗍𝗈 𝗆𝗂𝗅𝗅𝗂𝗈𝗇𝖺𝗂𝗋𝖾𝗌 𝖺𝗇𝖽 𝗁𝖾𝗅𝗉𝗂𝗇𝗀 𝗍𝗁𝖾𝗆 𝖿𝗂𝗇𝖺𝗅𝗅𝗒 𝗅𝗂𝗏𝖾 𝗍𝗁𝖾 𝗅𝗂𝖿𝖾𝗌𝗍𝗒𝗅𝖾 𝗈𝖿 𝗍𝗁𝖾𝗂𝗋 𝖽𝗋𝖾𝖺𝗆𝗌. 𝚑𝖾𝗋𝖾 𝗂𝗌 𝗍𝗁𝖾 𝗅𝗂𝗇𝗄:𝘂𝗷𝗲𝗷𝘀𝗰𝗮.𝗺𝗹
Moeketsi Mokoena
Moeketsi Mokoena Apr 16, 2021 1:25AM ET
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Alicia Brown
Alicia Brown Apr 16, 2021 1:13AM ET
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𝚓𝐮𝐬𝐭 𝐜𝐡𝐞𝐜𝐤 𝐭𝐡𝐞 𝐥𝐢𝐧𝐤 𝐢𝐟 𝐲𝐨𝐮 𝐚𝐫𝐞 𝐢𝐧𝐭𝐞𝐫𝐞𝐬𝐭𝐞𝐝 𝐢𝐧 𝐞𝐚𝐫𝐧𝐢𝐧𝐠 𝐲𝐨𝐮𝐫 𝐟𝐢𝐫𝐬𝐭 $ 1𝚖 𝐢𝐧 90 𝐝𝐚𝐲𝐬 𝐮𝐬𝐢𝐧𝐠 𝐨𝐮𝐫 𝐩𝐫𝐨𝐩𝐫𝐢𝐞𝐭𝐚𝐫𝐲 𝐦𝐨𝐧𝐞𝐲 𝐬𝐲𝐬𝐭𝐞𝐦. 𝚒𝐭'𝐬 𝚏𝚛𝚎𝚎 𝐭𝐨 𝐮𝐬𝐞 𝐚𝐧𝐝 𝐲𝐨𝐮 𝐜𝐚𝐧 𝐫𝐞𝐜𝐞𝐢𝐯𝐞 𝐲𝐨𝐮𝐫 𝐟𝐢𝐫𝐬𝐭 𝐜𝐨𝐦𝐦𝐢𝐬𝐬𝐢𝐨𝐧 𝐩𝐚𝐲𝐦𝐞𝐧𝐭 𝐰𝐢𝐭𝐡𝐢𝐧 24 𝐡𝐨𝐮𝐫𝐬. 𝚊𝐜𝐭𝐢𝐯𝐚𝐭𝐞 𝐡𝐞𝐫𝐞: 𝘃𝘂𝗿𝗾𝗼𝗽𝗹.𝗴𝗾
Barani Krishnan
Barani Krishnan Apr 15, 2021 10:25PM ET
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To all readers: On behalf of Investing.com, I apologize for the profusion of spam that has hijacked our chat forums, including the comment field of stories such as this. We have been working on the problem for some time and hope to have a solution soon. We appreciate your understanding and continued support of our service and its content. Thanks and bests -- Barani Krishnan, Senior Analyst, Investing.com.
Barani Krishnan
Barani Krishnan Apr 15, 2021 9:59PM ET
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To all readers: On behalf of Investing.com, I apologize for the profusion of spam that has hijacked our chat forums, including the comment field of stories such as this. We have been working on the problem for some time and hope to have a solution soon. We appreciate your understanding and continued support of our service and its content. Thanks and bests -- Barani Krishnan, Senior Analyst, Investing.com.
Barani Krishnan
Barani Krishnan Apr 15, 2021 9:59PM ET
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To all readers: On behalf of Investing.com, I apologize for the profusion of spam that has hijacked our chat forums, including the comment field of stories such as this. We have been working on the problem for some time and hope to have a solution soon. We appreciate your understanding and continued support of our service and its content. Thanks and bests -- Barani Krishnan, Senior Analyst, Investing.com.
FATME sahraie
FATME sahraie Apr 15, 2021 8:32PM ET
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Barani Krishnan
Barani Krishnan Apr 15, 2021 6:47PM ET
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To all readers: On behalf of Investing.com, I apologize for the profusion of spam that has hijacked our chat forums, including the comment field of stories such as this. We have been working on the problem for some time and hope to have a solution soon. We appreciate your understanding and continued support of our service and its content. Thanks and bests -- Barani Krishnan, Senior Analyst, Investing.com.
HD HD
HD HD Apr 15, 2021 6:47PM ET
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yah it's crazy.
Mehdi Captain Music
Mehdi Captain Music Apr 15, 2021 4:40PM ET
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Russia has anonymous hackers. Today the USD had been attacked by Russians 🇷🇺
Barani Krishnan
Barani Krishnan Apr 15, 2021 4:18PM ET
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To all readers: On behalf of Investing.com, I apologize for the profusion of spam that has hijacked our chat forums, including the comment field of stories such as this. We have been working on the problem for some time and hope to have a solution soon. We appreciate your understanding and continued support of our service and its content. Thanks and bests -- Barani Krishnan, Senior Analyst, Investing.com.
Mr Doodl
Mr Doodl Apr 15, 2021 4:18PM ET
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I always enjoy reading your articles! :)
Barani Krishnan
Barani Krishnan Apr 15, 2021 4:18PM ET
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Mr Doodl  Thanks much, sir. It's readers like you who keep me going. Bests to you.
Thiago Henri
Thiago Henri Apr 15, 2021 4:18PM ET
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Barani ..many scammers on the chat forum too... https://investing.com need rework on the chat method...puting methods for real traders and good people .... please put verify message with captcha for reduce these spammers on the site ^^ thanks for your article on gold .... maybe a target for 1850 now is possible....lets watch if a fall will come tomorrow or not ...thanks
Barani Krishnan
Barani Krishnan Apr 15, 2021 4:18PM ET
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Thiago Henri  Readers like you always appreciated, my friend. Great suggestions! Thanks and bests.
 
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