The UBS review states: "Given the risk of supply disruptions, we believe that a wide range of commodities provide an effective geopolitical hedge for investment portfolios and offer an attractive source of profit in an environment of accelerated growth, robust inflation and rising interest rates."
Accordingly, according to analysts, a further escalation of the conflict on the territory of Ukraine is likely to lead to a further increase in the price of gold: “We believe that a prolonged escalation of the military conflict could push the price of gold above $2,000 per ounce.”
Russia's invasion of Ukraine shocked more than just the financial world. Gold prices rose sharply, but according to Alain Korbani, portfolio manager at Finance SA, gold's rise is not a reaction to the attack on Kyiv, but an increase in inflationary expectations.
In an interview with Kitco News, the financial expert said: "I think the interest in gold is a reflection of fundamentals, and the fundamentals are the market's awareness that interest rates are not going to rise too high." Further: “The market is already saying that it does not believe in further growth, does not believe in raising interest rates, and we will soon reach the peak of growth and inflation.”
Russia's recent actions against Ukraine are undoubtedly putting pressure on global growth, which will force central banks around the world to "thrice" think about raising interest rates, Korbani said. "This war cannot lead to growth," he said. “The market has been telling us for several months that we are in a slowdown period, which means that interest rates cannot rise very high. The bond market tells us this, and the stock market has been moving sideways for several months now.”
With real interest rates likely to remain in negative territory this year, he said macroeconomic forces remain positive for gold.
The American bank Goldman Sachs expects further growth in gold prices due to the crisis in Ukraine. According to analysts, the value of the yellow precious metal could rise to $2,350 per ounce if demand for gold ETF shares shows a significant increase.