The escalation of the Ukraine crisis caused strong market turbulence yesterday. While the stock markets plunged following the invasion of Ukraine by Russian troops, safe havens were sought. Demand for government bonds and commodities spiked. At their peak, the prices for oil and gas jumped by 8 and almost 70 per cent, respectively (for natural gas on the Dutch futures exchange), as the markets feared a shortage of energy raw materials. Metals such as palladium, platinum, aluminium and nickel and some agricultural products also gained significantly on Thursday morning.
Gold taps highest level since September 2020
With investors seeking safe havens, gold reached its highest price since September 2020 at around 1,974 US$ per ounce on Thursday. The precious metal also benefited from rising inflation expectations and the commodity price rally. In a surprising development, it temporarily lost 95 US$ per ounce later that day. Short-term positions were apparently liquidated after it became known that the sanctions planned by the EU and US against Russia will not affect the energy and commodities sector for the time being. Oil prices came back from their highs, as did those for metals. Conversely, US equity markets saw a slight recovery.
However, the situation remains decidedly dynamic. This morning, gold is again trading slightly higher, while US stock index futures are down moderately. Forecasts for short-term market development remain just about impossible.
Gold in demand as safe haven
Gold traded at 1,893 US$ per ounce early last Friday. At 1,974.50 and 1,878.50 yesterday morning and evening, respectively, both the weekly high and low were marked in a single day. This morning, gold traded at 1,915.
The Xetra-Gold price also increased week-on-week, from 53.50 € per gram at the end of last week to 56.85 yesterday afternoon, its highest-ever trading level against the euro. It started trading this morning at around 55.00.
The geopolitical situation is likely to keep the markets on their toes, with fluctuations that may turn extremely violent in the short term. The current appeal of gold relies on its function as a safe haven.
I wish all readers a calm weekend.