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Metals Stocks: Gold settles back above $1,900 as sanctions hit Russia, fueling a rush into ‘precious havens’

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Gold futures shot higher on Monday, with prices settling back above $1,900 after the U.S. and its allies added new sanctions against Russia over the weekend as a result of its invasion of Ukraine last week.

Those sanctions include prohibiting any transactions with the Central Bank of the Russian Federation, as well as Russia’s national wealth fund and the Russian Ministry of Finance.

“If there is no de-escalation between the West and Russia, there will be a surge of physical investment demand into precious metals as a rush into precious safe havens explodes,” said Peter Spina, president and chief executive officer at GoldSeek.com, noting that Russia is also among the world’s biggest gold producers.

Still, gold prices may see “some selling pressures from some liquidity needs, so you will see some volatility,” Spina told MarketWatch. “It is difficult to trade this market in the short term,” but investors buying with a “longer-term focus will do quite well.”

““It is difficult to trade this market in the short term…. Investors buying with a longer-term focus will do quite well.””

— Peter Spina, GoldSeek.com

He said that while it’s “very difficult to make a solid call short-term call,” gold may “see a huge price explosion to the upside at any moment,” given that there are so many risks at the moment.

April gold
GCJ22,
+0.87%

GC00,
+0.87%

rose $13.10, or 0.7%, to settle at $1,900.70 an ounce after trading as high as $1,935.20. Prices based on the most-active contract, which finished down 0.6% last week, gained 5.8% for the month of February — the largest monthly rise since May, according to Dow Jones Market Data.

For now, gold traders looked at trade sanctions and “global alienation strong enough to force” Russian President Vladimir Putin to end the war with Ukraine, the inflation impact, and “longevity of clashes in Ukraine and chances of nearly a nuclear conflict,” according to Chintan Karnani, director of research at Insignia Consultants, who spoke to MarketWatch.

Gold bulls want the price to break $2,000 and hold $2,000 before the Federal Reserve monetary policy meeting in mid-March, he said. There will be “profit-taking and a sharp fall” in gold prices if the metal is unable to break past $2,000 before the central bank meets.

Meanwhile, one market strategist said that gold values should be more elevated and speculated that Russia may be liquidating some gold reserves to garner cash against the barrage of financial sanctions it is facing.

“It could be that the Russian central bank is dumping gold on the open market to shore up its devastated currency, since most of its FX reserves have been frozen,” wrote Marios Hadjikyriacos, senior investment analyst at XM, in a daily note.

Russia’s ruble
USDRUB,
+30.21%

marked an all-time low against the U.S. dollar, but that decline had moderated somewhat, down over 13% to 95.07, according to FactSet, after trading at 119.25 per dollar at its low, though trading has been described as thin and volatile. That decline came after Russia’s central bank raised a key lending rate 20%.

In other Comex trading, May silver
SIK22,
+1.70%

tacked on nearly 1.5% to $24.366 an ounce, ending the month with an 8.8% rise, while May copper
HGK22,
-0.47%

settled at $4.455 a pound, down 0.7% for the session, but up 3% for the month.

April platinum
PLJ22,
-0.99%

fell 1.1% to $1,038.70 an ounce, paring its monthly rise to about 1.8%, but June palladium
PAM22,
+5.00%

settled at $2,504.60 an ounce, up 5.9% Monday for a monthly climb of 6.3%.

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