Gold falls off eight-month peak as Russia agrees to US talks over Ukraine

Gold declined from an eight-month high after Russia agreed to talks with the US over the Ukraine standoff, easing some geopolitical concerns that have fuelled demand for the haven asset.

Russia responded to an offer for a meeting between foreign minister Sergei Lavrov and US secretary of state Antony Blinken in Europe probably late next week. America has accepted, “provided there is no further Russian invasion of Ukraine”, state department spokesperson Ned Price said in a statement.

Tensions have run high this week as the US ramped up warnings of a possible Russian attack on Ukraine, with President Joe Biden saying a “false-flag” event may be under way. Russian officials said no invasion of Ukraine was under way and have repeatedly stated that none is planned. 

The Kremlin said in an official response to the Biden administration’s proposed security assurances that the offers were unsatisfactory and Russia might have to resort to unspecified “military-technical measures”.

The standoff has increased the appeal of haven assets such as gold. The precious metal is still set for a third weekly gain even as the US Federal Reserve is preparing to raise rates, which could damp demand for non-interest bearing gold. 

“The measured, almost cold-hearted run, while geopolitics whipsaws other markets, indicates a persistent and reliable interest,” Nicky Shiels, head of metals strategy at MKS Pamp, wrote in a note. “Gold should continue to re-price into a higher range to internalise the Fed and inflation dilemma that was merely jump-started by geopolitical tensions.”

Citigroup analysts including Aakash Doshi upgraded their near-term price forecast to $1,950 an ounce from $1,825, citing the geopolitical tensions. Further out, the bank remains bearish, with a target of $1,750 over six to 12 months as “higher real yields and stronger equities can weigh on bullion prices again”.

Spot gold fell 0.4% to $1,891.48 an ounce at 1.50am, after closing at the highest level since June 10 on Thursday.

The Bloomberg dollar spot index was little changed.

Silver, platinum, and palladium fell.

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