Gold crept up 1.6% Tuesday, moving toward last week’s 17-month high amid concern about the conflict.
Gold crept up 1.6% Tuesday, moving toward last week’s 17-month high amid concern about the Russia-Ukraine war.
The precious metal often acts as a safe haven in times of international crisis. Gold has climbed 8% from Jan. 28 and recently traded at $1,940 an ounce, up 1.6% from Monday.
“Gold may continue to outperform other haven assets, with an added tailwind from central bank purchases and also displaying its characteristic as an inflation hedge,” Yeap Jun Rong, a strategist at IG Asia, told Bloomberg.
“The conflict has not seen any signs of easing and further escalation may heighten risks of persistent inflationary pressures, which will continue to draw traction for gold prices.”
Gold started rising in late January amid concern over U.S. inflation, as the metal is often used as a hedge against rising prices. U.S. consumer prices soared 7.5% in the 12-months through January, an almost 40-year high.
And inflation could worsen with the explosion of oil prices caused by the war. The U.S. benchmark crude price hit a seven-year high Tuesday, recently trading at $103.95 a barrel, up 8.6%.
As for the war, Russian strikes pounded Ukraine’s capital Kyiv and its second biggest city Kharkiv Tuesday. A 40-mile convoy of Russian soldiers is approaching Kyiv, which clearly signals an intensification of Russian attacks there.
The war also may dampen central bank interest-rate hikes globally. Higher rates are often bad for gold because they quell inflation.
But with the war putting economies at risk around the world, central banks may raise rates less than they were intending to before the conflict in Ukraine.
The Russian central bank said over the weekend that it would resume gold purchases after ending an extended period of buying about two years ago.
But with the ruble plunging and Russian access to its foreign currency supply curbed by sanctions, the Bank of Russia may now have to sell gold, Bloomberg noted.
