Gold futures moved higher early Wednesday, bouncing modestly after finishing the previous session at a two-week low as signs of progress in Russia-Ukraine talks sapped demand for safe-haven assets.
Gold came under pressure Tuesday after the resumption of talks between Russian and Ukraine negotiators. Although the talks produced no breakthroughs, both sides described the talks as constructive and Russia’s military said it would scale back military operations near Kyiv and the northern Ukraine city of Chernihiv.
But optimism soon gave way to skepticism about a ceasefire. Kremlin spokesman Dmitry Peskov said Wednesday that Russia hadn’t observed anything “really promising” in Ukraine proposals presented in Tuesday’s talks. Ukrainian President Volodymyr Zelensky and U.S. officials, meanwhile, cast doubt on whether any pledge to pull Russian troops back amounted to a shift.
“While the war in Ukraine is undoubtedly the key short-term market driver, a point will soon be reached when investors may feel the bearish impact of the conflict has been fully priced in, particularly as long as talks over a peaceful resolution continue,” said Rupert Rowling, market analyst at Kinesis Money, in a note.
“As a result, the focus will switch back onto the macroeconomic scenario in which the cost of living is rising at the fastest level in decades for many countries,” he said.
While gold has benefited from the rush to safe-haven assets following Russia’s invasion of Ukraine, “any unwinding of those fear trades coupled with central banks hiking rates is likely to see gold fall out of favor,” Rowling wrote.