Gold steady as investors assess Russian sanctions and inflation

Bullion is having a strong start to 2022 on the back of rising geopolitical tensions in Europe. PHOTO: REUTERS

SINGAPORE (BLOOMBERG) - Gold held steady as investors weighed the severity of Western sanctions on Russia against prospects for tighter United States monetary policy.

Spot gold was little changed at US$1,900.39 an ounce on Wednesday (Feb 23) morning in Singapore. Prices had touched $1,914.25 on Tuesday, the highest level since June 1, before ending 0.4 per cent lower. Silver and platinum were up and palladium steady.

Bullion is having a strong start to the year on the back of rising geopolitical tensions in Europe, which have pushed prices to the highest in more than eight months despite expectations that the US Federal Reserve will raise interest rates next month to curb inflation.

The tensions in Europe are raising concerns over potential disruption of supplies of raw materials, bolstering prices for everything from energy to wheat and nickel. "The likelihood of a regional war seems high and that will likely keep inflationary pressures elevated for much of the year," said Oanda Corp senior market analyst Edward Moya.

"Bullion seems like it is taking a little break right now, but investors will soon be saying 'I love gold', as geopolitical and growth concerns will drive safe-haven demand."

The geopolitical strains between the West and Russia show no signs of abating. US President Joe Biden unveiled sanctions targeting Russia's sale of sovereign debt abroad and the country's elites, responding to what he described as the start of an invasion of Ukraine.

While the US leader said economic retaliation would increase if Moscow "continues its aggression", the measures stopped short of the devastating steps that the nation and its allies have threatened.

Russian President Vladimir Putin said this week he would recognise two self-proclaimed separatist republics in the east of the smaller neighbour. Mr Putin, who has denied Russia intends to invade Ukraine, said on Tuesday that  he is not sending troops into the breakaway areas for now, but added: "Since there's a conflict there, with this decision we're clearly showing if necessary we are ready to fulfil this obligation."

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