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Sept. 21, 2022, 2:56 p.m. EDT

Gold prices end higher as Russia steps up Ukraine war, falls on Fed rate increase decision

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By Myra P. Saefong and William Watts

Gold futures settled higher Wednesday, buoyed by haven-related buying interest after Russian President Vladimir Putin ordered reservists to mobilize and made remarks seen as a threat to use nuclear weapons, as he escalated the war in Ukraine.

Prices then declined in electronic trading on the back of the Federal Reserve decision to deliver another interest rate increase of 75 basis points. The central bank also announced plans for rates to go sharply higher before the end of the year.

Price action

  • Gold for December delivery /zigman2/quotes/210034565/delayed GC00 +0.20% /zigman2/quotes/210039517/delayed GCZ22 +0.57% rose $4.60, or 0.3%, to settle at $1,675.70 an ounce on Comex. The most actively traded contract ended Tuesday at its lowest since April 2020. In electronic trading shortly after the Fed announcement, prices traded at $1,667.40, before edging up to $1,685 around the start of Fed Chairman Jerome Powell’s press conference.

  • December silver /zigman2/quotes/210315219/delayed SI00 -0.19% /zigman2/quotes/210319410/delayed SIZ22 +0.82% rose 30 cents, or nearly 1.6%, to settle at $19.48 an ounce.

  • December palladium /zigman2/quotes/229904593/delayed PAZ22 -0.72% lost 2.2% at $2,123.50 an ounce, while October platinum shed 0.7% to settle at $916 an ounce.

  • December copper /zigman2/quotes/210059544/delayed HGZ22 -0.01% fell 1% to $3.467 a pound.

Market drivers

Putin ordered a partial mobilization of reservists and warned the West that he wasn’t bluffing about using “all instruments at [Russia’s] disposal” to protect Russia’s territory, in what was seen as a veiled reference to Russia’s nuclear capability.

President Putin’s announcement on partial mobilization rattled markets Wednesday, ahead of the Fed policy decision, said William Masters, senior sales trader at Saxo Markets UK. Gold and the dollar rallied on a flight to havens, he said.

Gold’s gains were relatively modest for the session, however. A stronger dollar has been a weight on commodity prices, along with a sharp push higher in Treasury yields. A stronger dollar makes commodities priced in the unit more expensive to users of other currencies, while higher yields raise the opportunity cost of holding nonyielding assets.

Fed decision

After gold futures settled Wednesday, the Federal Reserve agreed to a third straight interest rate increase , raising its benchmark fed-funds rate by 0.75 percentage point to a range of 3% to 3.25%. The central bank also penciled in another 125 basis points in rate hikes by year-end.

“No surprise here, except for those who had feared a full percentage point increase,” George Milling-Stanley, chief gold strategist at State Street Global Advisors, told MarketWatch. The 75 basis point hike was “essentially already priced into the financial markets, so I am not expecting any significant price moves as a result of this meeting.”

The U.S. dollar /zigman2/quotes/210598269/delayed DXY +0.07% strengthened in the immediate aftermath of the policy decision, pressuring dollar-denominated gold prices.

The Fed policy decision will be followed by decisions from the Bank of Japan, Bank of England and Swiss National Bank on Thursday, said Raffi Boyadjian, lead investment analyst at XM, in comments emailed early Wednesday.

Gold futures had settled Tuesday at their lowest since April 2020, pressured by the “aggression of the Fed, as well as other central banks including the Bank of England and more recently the European Central Bank and [Sweden’s] Riksbank,” said Rupert Rowling, market analyst at Kinesis Money, in comments on the market.

—Associated Press contributed to this article.

Hear from Ray Dalio at the Best New Ideas in Money Festival on Sept. 21 and Sept. 22 in New York. The hedge-fund pioneer has strong views on where the economy is headed.

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$ 1,784.90
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