Gold extends gains amid talks of further energy sanctions on Russia

Gold extended gains on Thursday as risk sentiment continues to crash over the military crisis in Ukraine, with the US and allies entering discussions on further energy sanctions against Russia. Gold rose 0.9% to $1,963.48 per ounce; near its highest in two weeks. US gold futures jumped 1.3% to $1,963.50 per ounce in New York.

In response to Russia’s continued invasion of Ukraine, the US is currently working with NATO on more measures to prepare for the possibility of Russia deploying biological, chemical or nuclear weapons as part of the war.

Earlier, National Security Advisor Jake Sullivan said that the US and the European Union are also “close to a deal” aimed at slashing Europe’s dependence on Russian energy.

The war in Ukraine and ensuing sanctions have pushed up commodity prices and fueled inflation, resulting in faster monetary tightening from some central banks while also threatening growth.

The risk of stagflation has driven up demand for gold as a safety hedge, in spite of the US Federal Reserve’s more hawkish tone and higher bond yields that are weighing on the non-yielding bullion.

Analysts believe additional rate hikes will not be enough to offset the positive forces, as they would still lag behind inflation.

Very strong underlying inflationary pressures continue to be the main supportive fundamental factor driving the gold price. There are other ancillary factors, most notably, the war in Ukraine. Elevated inflation prints and geopolitical uncertainty could even drive gold modestly higher around $2,000 an ounce in the second quarter.

Earlier on Thursday, the gold market was holding on to solid gains just below critical resistance at $1,950 an ounce and new momentum in the US labor market has not impact the precious metal’s bullish sentiment. US weekly jobless claims have once again dropped below 200,000, falling to its lowest level in 53 years.

Thursday, the US Labor Department said that weekly jobless claims fell by 28,000 to 187,000, down from the previous week’s revised estimate of 215,000 claims.