Last week ended with the opposite correlation of prices, which is typical for crises. Moreover, fears of a military conflict in eastern Ukraine prevailed. Uncertainty about a possible imminent increase in the key interest rate in the US also had a negative impact on the cost of precious metals.
U.S. fears that a Russian invasion of Ukraine might be imminent have sent Asia-Pacific equities largely down and oil prices hit seven-year highs. It also helped boost bonds while the euro was under pressure.
A Russian attack on Ukraine could begin at any moment, White House national security adviser Jake Sullivan said Friday. It is also likely that this could happen with an airstrike, according to CNBC. “The gold market is seeing some capital inflows in search of protection as geopolitical risks prevail and there are concerns about how higher interest rates will affect global growth,” said Chris Gaffney, president of global markets at TIAA Bank.
Gold is seen as a hedge against rising inflation and is often used as a safe-haven asset in times of political and financial uncertainty. Rising tensions in Ukraine has accelerated the sell-off on Wall Street. US stocks fell in the previous session after data showed the sharpest annual rise in consumer prices in 40 years, which increased pressure on the US Federal Reserve to raise interest rates aggressively.
“Gold is starting to gain momentum, and some investors are looking for protection from an overly aggressive Fed tightening that could threaten economic growth,” said Edward Moya, senior market analyst at OANDA. “Gold could rally above $1,900 an ounce if there is any Russian troop movement.”
On Sunday, the US warned that Russia could soon create an excuse to invade Ukraine. However, Russia denied these allegations and accused the West of "hysteria" even as it continues to deploy troops along its borders with Ukraine.