Metals Stocks: Gold falters as dollar rises, investors eye Russia-Ukraine developments

Ukrainian President Volodymyr Zelensky said he was willing to discuss his country adopting a neutral status and offer security guarantees to Russia to secure peace “without delay.” Zelensky said that neutrality, which would keep Ukraine out of NATO or other military alliances, should be put to Ukrainian voters in a referendum after Russian troops withdraw.

Moscow last week said its focus was now on securing the entire eastern Donbas region, which has been partially controlled by Russia-backed separatists since 2014.

“This positivity that an end can be found to the bloodshed in Ukraine has reduced gold’s appeal as a haven asset,” said Rupert Rowling, market analyst at Kinesis Money, in a note.

Meanwhile, the dollar was stronger versus major rivals, with the ICE U.S. Dollar Index
DXY,
+0.52%
up 0.4%. A stronger dollar can be a negative for commodities priced in the currency, making them more expensive to users of other currencies.

Treasury yields rose sharply last week and rates on shorter dated maturities continued to push higher Monday. Higher yields raise the opportunity cost of holding non-yielding assets.

“The macroeconomic outlook in which central banks across the world are expected to make a series of interest rate increases over the course of the year will be a perennial headwind to gold’s ability to climb any higher,” Worling said. “However, while gold’s upside potential looks limited, the war in Ukraine also provides a firm floor for the precious metal. So while the fact both sides are engaging in talks is a positive sign, until those talks successfully bring an end to the fighting, investors will be unlikely to fully unwind the fear trades placed following Russia’s initial invasion.”

Rowling sees that dynamic likely to hold gold in a range between $1,900 and $2,000 an ounce “for the foreseeable future.”