By Barani Krishnan
Investing.com -- It has taken 19 months but gold’s return to $2,000 didn’t feel like a champagne moment … probably because all the fizz was in the oil market.
Gold’s most-active contract on New York’s Comex, April, settled up $29.30, or 1.5%, at $1,995.90 an ounce. Earlier in the session, it got to $2,007.50 — well short of August 2020 record highs of above $2,100.
“Crude prices skyrocketed to a 13-year high as energy traders were thinking the war in Ukraine could lead to an even tighter oil market as the U.S. tries to convince the Germans to agree upon a ban of oil imports from Russia,” said Ed Moya, analyst at online trading platform OANDA, said, referring to both U.S. crude and Brent’s ascension to $130 peaks versus the 2008 record high of $147.
But “after surging to above the $2,000 level, gold prices tentatively turned negative as investors become more convinced that European growth won’t completely disappear this year and that stagflation risks have heavily been priced in,” added Moya.
And while oil has rallied 60% this year on the back of the Russia-Ukraine crisis, gold long “will be disappointed that … it has achieved only a 10% gain year to date,” Ross Norman, chief executive officer at Metals Daily, was quoted saying on MarketWatch.
He added that this was, however, typical of gold, for “prices to take a slow, unemotional and considered view of events."
How gold performs rest of this week and next week could depend much on Thursday’s Consumer Price Index reading for February and the March 15-16 meeting of the Federal Reserve’s policy-making Federal Open Market Committee, which will decide the first pandemic-era rate hike.
The so-called CPI grew 7.5% year-on-year in January — already the highest in 40 years. The consensus for February is a 7.9% year-on-year growth — which some economists think is conservative.
Fed Chair Jerome Powell has so far indicated that he’s comfortable with a quarter percentage point rate hike next year though many others in the FOMC are clamoring for more. Anyway, Powell’s comments came just before oil prices hit $130 a barrel, so he may reconsider his still-dovish views.