(Bloomberg) — Gold dropped from an eight-month high and wheat slid after Russia said some of its troops would return to their bases. Industrial metals including nickel held steady.
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Some Russian military units will start returning to their permanent bases on Tuesday after completing drills, according to the country’s Defense Ministry. Earlier this week, President Vladimir Putin countered U.S. warnings that Russia may invade Ukraine within days by emphasizing a de-escalation of tensions and continued efforts to find a diplomatic resolution. Moscow has repeatedly denied it plans to invade.
Russia’s status as a raw material-exporting heavyweight has roiled markets from wheat to palladium in recent weeks as traders braced for a potential disruption to exports. The geopolitical tensions came against a backdrop of dwindling stockpiles and constrained supply that’s spurred rallies in many commodities this year.
Bullion fell as much as 1.4% on Tuesday, slumping with other haven assets. Gold’s traditional role as a hedge against geopolitical stress had pushed it toward $1,900 an ounce, despite diplomatic efforts to defuse tensions over Ukraine. The hottest U.S. inflation print in 40 years last week also provided support, despite expectations the Federal Reserve will hike rates more aggressively to tame price pressures.
“A de-escalation of tensions reduces the need to hold safe haven assets,” said Giovanni Staunovo, a commodity analyst at UBS Group AG. “There were other factors supporting gold recently, which are still around.”
Spot gold was down 1.2% to $1,849.11 an ounce as of 12:43 p.m. in London, after earlier touching its highest intraday level since June 11. The Bloomberg Dollar Spot Index dropped 0.2%. Silver and platinum also declined. Palladium — of which Russia is the top exporter — slumped as much as 5.5%.
Wheat futures in both Chicago and Paris retreated about 2% after Russia said troops were starting to pull back. That helped to soothe concerns about potential disruptions for Black Sea grain shipments which have whipsawed prices in recent days. Both Ukraine and Russia are major exporters.
Corn also traded as much as 1.4% lower. Ukraine ranks as the world’s fourth-largest shipper.
Meanwhile key base metals supplied by Russia, including aluminum and nickel, were largely unmoved by the report. While both metals have been driven higher in recent weeks as tensions built, traders may be more focused on wider supply constraints that have shrunk stockpiles to multiyear lows. Inventories of both aluminum and nickel fell again on the London Metal Exchange on Tuesday.
“Fundamentals for both are strong and even without tensions,” said Geordie Wilkes, head of research at Sucden Financial Ltd. “We see upside to both.”
Aluminum traded 0.3% lower at $3,204 a ton on the LME. Nickel rose 0.2%, while copper climbed 0.3%.
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