Gold up Most in 5 Days as Treasurys Dip, Oil Surges and Stocks Fall

© Reuters.

By Barani Krishnan

AiVIF.com -- Gold gained its most in five days as oilprices at above $120 a barrel sent U.S. stocks lower and investors toward safe-havens.

The near-term outlook for the yellow metal, however, oscillated between negative to flat as Federal Reserve officials, from Chairman Jerome Powell down, appeared at their hawkish best in 20 years to tackle inflation expanding at its fastest in four decades.

“Gold should continue to stabilize here as long as stocks don’t push much higher,” said Ed Moya, analyst at online trading platform OANDA.

But he adds: “Whether investors choose gold or try to keep riding anything tied to the commodity wave higher or play defensive by going back to high-tech and consumer staples stocks is the big unknown.”

The most-active gold futures contract on New York’s Comex, April, settled up $15.80, or 0.8%, at $1,937.30 an ounce.

It was the biggest daily percentage gain, as well as the highest closing price, for the benchmark gold futures contract since March 17.

Wednesday’s tick-up in gold came as the yield on the U.S. 10-year Treasury note fell for the first time in three days. Stocks on Wall Street also tumbled, with the S&P 500 falling its most since March 11.

While gold thrives as a hedge against political and economic uncertainty, the price of the yellow metal itself has been a victim of uncertainty of late. Since returning to $2,000 levels in early March, for the first time in 19 months, Comex’s front-month got to as high as only $2,078 before falling back to $1,900 levels.

Over the past week, investors have also struggled to determine which has bigger implications for gold: a potential recession and other economic fallout from Russia’s war in Ukraine (positive) or massive rate hikes planned by Fed to break the back of the worst inflation since the 1980s (negative).

San Francisco Fed President Mary Daly, in an interview with Bloomberg, said it was “too soon” to determine whether there will be a global recession due to the war in Ukraine.

But other officials of the central bank’s policy-making Federal Open Market Committee, or FOMC, seemed determined to deliver a 50-basis point rate at its next meeting in May, and possibly in June too. That would be a 180% degree turn on the modest 25-basis point hike approved last week by the FOMC in its first pandemic-era rate hike.

With a total of six potential rate hikes left for the year based on the number of FOMC meetings on scheduled, U.S. rates could be at between 2% and 2.5% by December, making for the sharpest Fed pivot in 20 years, analysts say.