Gold set for weekly gain as Ukraine, inflation lift appeal

Gold prices edged lower on Thursday as riskier assets firmed, but bullion was still set for a second straight weekly gain driven by safe-haven demand stemming from the Ukraine crisis and broadening inflationary pressures.

Spot gold eased 0.3% to $1,972.17 per ounce, as of 0713 GMT, after a six-session winning streak. U.S. gold futures were down 0.4% at $1,977.20.

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Asian shares tracked Wall Street higher on hopes that U.S. inflation may be close to peaking, though several major central banks raised rates aggressively. 

However, gold has gained about 1.4% so far in the week. Most markets will be closed on Friday for a holiday.

“Political risk premium through the Ukraine war escalation is building again, which pushed all prices higher in general commodities and that`s really creating that inflation environment,” said Stephen Innes, managing partner at SPI Asset Management.

U.S. monthly producer prices increased by the most in more than 12 years in March amid strong demand for goods and services, the latest sign of persistently high inflation that could compel the Federal Reserve to aggressively tighten monetary policy.

“Gold at this moment is trending and it`s supported mainly by what we have heard from the Fed, the U.S. inflation (data),” said Brian Lan, managing director at dealer GoldSilver Central.

Meanwhile, U.S. President Joe Biden announced an additional $800 million in military assistance to Ukraine on Wednesday, ahead of a wider Russian assault expected in eastern Ukraine.

Non-yielding bullion is considered a safe store of value during uncertain times and a hedge against inflation.

The U.S. dollar index eased off May 2020 highs following a dip in Treasury yields, making zero-yield gold more attractive for other currency holders.

Spot silver dropped 0.2% to $25.68 per ounce, platinum dipped 0.2% to $984.21, while palladium rose 1.8% to $2,357.36.