It has been a pleasing week for gold investors. Yesterday, the precious metal surpassed the 1,900 US$ per ounce mark for the first time since mid-June 2021.
However, gold prices also faced headwinds from rising capital market interest rates over the course of the week. Yields on ten-year US Treasuries climbed to their highest level since the end of 2019 at 2.05 per cent, while yields on German Bunds of the same maturity also rose to a three-year high of just under 0.32 per cent. Inflation data from the UK and Canada, which rose to more than 30-year highs, boosted the gold price but where not the reason for the gold price rally.
Geopolitical situation drives gold price
The yellow metal owes its recent price jump largely to concerns about a further escalation of the Ukraine crisis, which drove investors to seek supposedly safe havens. In addition to currencies such as the yen and the franc, gold also benefited from the market’s risk aversion and was thus able to gain significantly over the course of the week due to the geopolitical news situation.
Significant week-on-week gains in US dollar and euro
Gold prices stood at 1,826 US$ per ounce early last Friday. Following US warnings that the Ukraine conflict could escalate this week, the precious metal jumped to 1,860 on Friday afternoon. Having thus broken out of its multi-week trading range, it rose further to 1,880 on Tuesday, but dropped back to 1,845 the same day following reports indicating an easing of the situation as a result of an intended Russian troop withdrawal. Emerging doubts about these withdrawal plans then pushed the gold price up to 1,902 last night; this morning, it traded slightly lighter at 1,893 US$ per ounce.
The Xetra-Gold price has also risen significantly since last week, from 51.60 € per gram at the end of last week to 53.70 yesterday afternoon, the highest level since August 2020. It was expected to kick off trading today at 53.50.
Ukraine and inflation continue to dominate
On the markets, the geopolitical situation is currently replacing the inflation debate and the central banks’ reactions to inflation as the dominant topic. A de-escalation of the Ukraine conflict would bear the potential for a short-term setback of the gold prices. In the medium term, the yellow metal will likely continue to benefit from its ascribed status as a safe haven.
I wish all readers a happy and safe weekend.