April Comex Gold futures closed higher at $ 20 a day and last traded at $ 1,917.90 after falling shortly below $ 1,900 an ounce.
“Gold prices fell after the Russia-Ukraine peace talks brought some progress. For a moment, it seemed that the greatest geopolitical risk could be offset by a major de-escalation and trade in safe havens was quickly abandoned,” the senior analyst said. of the OANDA market. Edward Moya.
Russia pledged on Tuesday to limit its attacks on Ukraine, specifically around the capital Kyiv and Chernihiv. The statement comes after Russia-Ukraine talks in Istanbul.
“In order to increase mutual trust and create the necessary conditions for further negotiations and the achievement of the ultimate goal of the agreement and the signing of (one) agreement, it was decided to radically reduce, by a large margin, military activity in the directions of Kiev and of Chernihiv. “Russian Deputy Defense Minister Alexander Fomin told reporters.
News of the de-escalation strengthened the risk climate, pushing US stocks higher, with the Dow Jones industrial average up almost 1%, the S&P 500 up 1.2% and the Nasdaq up 1.8%. day.
A more worrying development was the reversal of the 10-year and 2-year bond yield curve for the first time since September 2019. This happens when long-term bonds have lower yields than short-term bonds. The reversal was brief, but the markets are closely following a more permanent movement.
“Wall Street seems to believe that the economy is still stable even after the reversal of the 2s10s curve for the first time since 2019. The countdown to a recession is beginning, but growth should be strong at least for next quarters. “The reversal did not last long, but that was somewhat to be expected, given how optimistic large sections of Wall Street remain,” Moya said on Tuesday.
The main concern of investors is the US Federal Reserve to hurt economic growth as it tightens monetary policy this year.
“The latest easing comes at a time when interest rate markets are ready for the Fed to launch an aggressive surprise in the markets,” said TD Securities commodity strategy analysts. “While the yield curve may bring back the whispers of an impending recession that could rekindle investors’ interest in gold, ETF flows have not historically been strongly linked to the yield curve during a hiking cycle. This suggests that strong “ETF inputs have probably been linked to the appetite for safe haven, which is leading to negative risks as negotiators continue to work for a ceasefire.”
Meanwhile, the President of the Federal Reserve Bank of Philadelphia, Patrick Harker, revealed that he is not so worried about a recession, adding that the signal sent by the 10 and 2 year yield curve is just one of many.
“As a policy maker, I have to look at the combination of all these numbers and find a realistic policy course and not rely on any number,” he told the Center for Financial Stability in New York. “I am open to sending a strong message with an increase of 50 basis points in the next meeting.”
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