Column: Electric dreams turn into a nightmare for battery metals
A sector that was once racing to build new supply has been closing mines and deferring projects as low prices bite into the cost curve.
Gold extended gains for a third straight day as investors sought haven in the precious metal amid mounting geopolitical unease fueled by escalating Russia-Ukraine tensions.
Spot gold rose 0.7% to $2,650.96 per ounce by 12:55 p.m. ET, hitting its highest in more than a week. US gold futures gained 0.9% to $2,653.90 per ounce in New York.
Gold’s latest rally comes as geopolitical tensions intensified after Russian President Vladimir Putin approved an updated nuclear doctrine expanding the conditions for using atomic weapons.
“Clearly that’s sparked safe-haven interest,” said Peter Grant, vice president and senior metals strategist at Zaner Metals, a precious metals dealer based in Chicago.
“I do see the inverse correlation has re-exerted itself in recent weeks and see dollar strength as a bit of a headwind for gold moving forward.”
Attention is also fixed on several Federal Reserve officials who are set to speak this week. Market expectations for a December rate cut have declined significantly, with odds now at 55.5%, down from 82.5% just a week ago.
“A December pause in Fed rate cuts could subdue the gold price in the short term, but the easing monetary cycle, macroeconomic and geopolitical uncertainty, and healthy physical demand will maintain positive gold market sentiment,” ANZ wrote in a note.
Standard Chartered analyst Suki Cooper said in a Bloomberg note that heightened geopolitical risk, coupled with broad market uncertainty and unknown risks since the pandemic, “has rekindled interest in the gold market as a safe-haven asset.”
“But macro factors — including the US dollar and rate-cut expectations — are likely to set the tone in the near term,” she added.
The US dollar also rebounded on Wednesday, reviving the ‘Trump Trade’ rally after a three-day slide, limiting gains in dollar-priced bullion by making it costlier for overseas buyers. Last week, gold saw its steepest weekly drop in over three years as the dollar index hit a one-year high.
Despite the sharp pullback, gold remains one of the hottest commodities of 2024, up approximately 28% year to date, with gains underpinned by central bank buying, the Fed’s pivot and geopolitical tensions.
The momentum could take gold even higher than the record highs set earlier this year. Goldman Sachs sees gold extending its advance to $3,000 an ounce by the end of next year, while UBS predicts it will hit $2,900.
(With files from Bloomberg and Reuters)
