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Gold prices rose by nearly 2% late on Thursday amid mixed reports on the health of the US economy and uncertainty over Russia-Ukraine peace talks.
Spot gold was up 1.9% to $3,240.87 per ounce by 5:40 p.m. ET, restoring all of this week’s losses. US gold futures also gained 1.7% to $3,243.90 an ounce in New York.
Gold’s recovery follows new economic readings for the month of April that showed US producer prices unexpectedly declined by the most in five years, while retail sales barely increased.
“Thursday’s data creates more room for the Fed to cut rates, with a more dovish expectation building in the market,” Peter Grant, vice president and senior metals strategist at Zaner Metals, told Reuters.
However, data from earlier this week showed consumer prices rose less than expected, which would make the US central bank lean towards a wait-and-see approach.
A lower interest rate raises the appeal of gold, a non-yielding asset and a safe haven during times of uncertainty.
So far this year, bullion has risen by more than 22%, fueled by a rebound in demand for bullion-backed ETF products, strong central bank buying and speculative Chinese demand.
Geopolitical instability
Adding to gold’s case is the rising geopolitical instability involving the world’s biggest powers.
On Thursday, doubts over the Ukraine peace deal crept in after Russian President Vladimir Putin skipped out on direct talks, instead sending a second-tier team of negotiators.
“Putin not attending the peace talks in Turkey dims expectations of progress towards a peace deal, which I think is helping to underpin gold prices today,” Zaner’s Grant said.
There could be further unwinding of long positions in gold, said Christopher Wong, a currency strategist at Oversea-Chinese Banking Corp. While some support should come in around $3,050-$3,150 an ounce, “gold may risk a deeper pullback towards $2,950 levels,” if the support breaks, he said.
Investors also remain cautious over eased trade tensions between the US and China, as their current tariff deal is only effective for 90 days.
Meanwhile, gold largely shrugged off positive developments in the Middle East, with US President Donald Trump stating he is close to an agreement with Iran to curb the Islamic Republic’s nuclear program.
(With files from Reuters)
