Gold fell from a one-week high on Tuesday but was little changed on Wednesday morning as investors are weighing signs of an improving U.S. economy against geopolitical tensions in Russia/Ukraine and the Middle East. The Federal Reserve concludes their two-day meeting on Wednesday, and data is expected to show that the economy rebounded last quarter. Also the dollar has reached an almost four-month high again 10 other major currencies, interest rates may be raised soon, and inflation is below the Fed’s comfortable rate of 2%.
On the other hand, geopolitical tensions have helped gold gain 8.2% this year. In another attempt to get Russian president Vladimir Putin to back off Ukraine, the U.S. and the European Union have sought increased sanctions targeting Russia’s banking, energy, and defense industries. Meanwhile, Israel’s military continues to press into Gaza and target terrorist sites.
This morning gold traded at $1,300.90 an ounce by 7:42 a.m. on the COMEX in New York.
It is an interesting time for gold with multiple factors at play that investors must grapple with. As the U.S. economy improves, gold becomes less attractive as a hedge against inflation, a weak dollar, and other economic crises. However, geopolitical tensions are causing investors to hold onto their gold as a safe-haven asset.