European stocks and US futures climbed on Wednesday, the day after the S&P 500 tumbled to a nine-month low on worries that energy prices may extend gains as the US bans imports of Russian crude. Benchmark Treasury yields also rose as havens retreated, putting pressure on non-interest bearing gold.
Spot gold fell as much as 2.4% in London, moving back toward $2 000 an ounce.
Bullion is still up about 10% this year as investors seek a hedge against the threat of an inflationary shock to the global economy. Holdings in gold-backed exchange-traded funds have reached the highest since March 2021, with inflows of about 152 tons this year, according to initial data compiled by Bloomberg.
The impact of the war in Ukraine and sanctions on Russia have reverberated across the globe, driving commodities higher on supply woes. The latest move by the US to ban Russian oil and the U.K. to phase out Russian crude imports by year-end has stoked further fears of stagflation, where prices rise while economic growth stutters.
“The ban on Russian oil by the US is causing more inflation jitters,” said Howie Lee, an economist at Oversea-Chinese Banking Corp. “We all saw that coming, but still, it feels like a roller-coaster drop moment. With this ban, oil is easily expected to trade at new records. By that correlation, it is not difficult to see why gold may also be trading at a new record high soon.”
Spot gold was down 2.3% at $2,004.07 an ounce by 1:18 p.m. in London. Prices touched $2,070.44 on Tuesday, just $5 short of an all-time high reached in August 2020.
Palladium fell 2.3% in continued volatile trading. Prices surged to a record this week on concerns over potential supply disruptions from Russia, which accounts for about 40% of all mined production. Silver and platinum both slipped from near June highs.
In base metals, most contracts declined on the London Metal Exchange, with copper losing 1.7% to $10,048 a ton. Nickel prices earlier jumped by the exchange limit in Shanghai in the wake of unprecedented moves and a trading suspension on the LME following a short squeeze.
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