Gold Firms Near 1-Week High as Political Risks Buoy Demand

GOLD - JAKARTA. Gold prices firmed on Tuesday as Russia-Ukraine concerns kept the safe-haven metal supported near the previous session's over one-week high, while markets await U.S. inflation data that is crucial for the Federal Reserve's tapering timeline.

Spot gold was steady at $1,819.71 per ounce, by 0614 GMT, having risen to the highest level since Jan. 26 on Monday. U.S. gold futures dipped 0.1% to $1,820.40.

"Geopolitical tensions surrounding Russia and Ukraine are pushing gold prices higher. Besides, investors are waiting for Thursday's U.S. inflation data," said Margaret Yang, a strategist at DailyFX, adding that January inflation is projected to rise higher than December levels.

According to a Reuters poll, the U.S. consumer price index for January is expected at an annual rise of 7.3%, which would be the largest such increase since 1982.

"U.S. CPI will be the major risk to gold this week. A high print would probably be quite bearish as traders place higher odds on Fed tightening," said IG Markets analyst Kyle Rodda. The expected 7.3% rise in CPI is a high bar to meet, "so if it undershoots, gold could get a run-on," Rodda added.

Limiting gold's gains, the benchmark 10-year U.S. Treasuries firmed near their highest levels in more than two years. Gold is considered a hedge against inflation and geopolitical risks, yet rate hikes would raise the opportunity cost of holding non-yielding bullion.

If Russia invades Ukraine, U.S. President Joe Biden said on Monday that the Nord Stream 2 gas pipeline would be halted while British Prime Minister Boris Johnson said sanctions and other measures will be ready. Demand for safe-haven assets such as gold has helped offset pressure from expectations of faster U.S. rate hikes this year, analysts noted.

Silver fell 0.56 % to $22.86, platinum was down 0.5% at $1,015.20, and palladium fell 0.2% to $2,258.29.