Gold headed for a weekly advance, lifted by demand for haven assets as Russia escalated its assault on Ukraine.

Prices eased after spiking earlier on news that Russia attacked Europe’s largest nuclear power plant, raising concerns over the safety of the facility in Ukraine. Investors are weighing the economic fallout from Russia’s invasion of its neighbor, which is disrupting flows of energy, grains and metals. The resulting surge in oil prices has stoked concerns about global growth and inflation risks.

Investors have sought out bullion as a store of value amid the uncertainty, with inflows into exchange-traded funds backed by the metal amounting to about 34 tons this week, according to initial data compiled by Bloomberg. Traders are also weighing the prospects of monetary policy tightening while awaiting a key monthly US jobs report due Friday.

Federal Reserve Chair Jerome Powell reaffirmed the US central bank is on track to raise interest rates this month and commence a series of hikes to curb the highest inflation in decades, although the invasion of Ukraine means it will move “carefully.”

In terms of the geopolitical risk premium, “pretty much all of it for the time being has been factored into the gold price,” said Gavin Wendt, senior resource analyst at MineLife Pty. “Even if we see an interest rate rise, we’re likely in the current environment not to see too many rate rises during 2022.” That will mean that real rates will still be negative, which is typically very positive for gold, he said.

“Some traders are at the moment probably taking profits and are looking for the next catalyst that may move prices higher,” Wendt added. “I expect gold prices to remain fairly resilient around current levels.”

Spot gold traded at $ 1 940.78 an ounce at 11:36 am in Singapore, after earlier rising as much as 0.8% to $ 1 950.88. Prices are up 2.7% this week.

Palladium added 0.2%, bringing this week’s gain to about 18%, on concerns over potential supply disruptions as Russia produces about 40% of the metal mined globally. Silver was steady, while platinum rose.

© 2022 Bloomberg

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