World gold prices increased above $1,900/ounce for the first time since June, investors were rushing into the safety of gold bars after US President Joe Biden said that there were signs that "Russia is planning to attack Ukraine".
Spot gold rose 1.7% to $1,899.84/ounce at 7:12 p.m. GMT on February 18 after hitting its highest price since June 11 at $1,900.99/ounce. The gold futures price is 1.6% higher, at 1.902 USD. The precious metal used by investors as a store of value during stress has increased by more than 5% this month.
US stocks fell more than 1% as tensions in Ukraine increased. The ceasefire forces in eastern Ukraine and the government forces in Kiev have made accusations of mutual shelling in Donbass. Meanwhile, Russia deported US Deputy Ambassador Bartle Gorman, while Ukraine warned that it could re-accumulate nuclear weapons.
As the real timing becomes uncertain and anxiety rises, gold remains a safe haven asset, said Jim Wyckoff, senior analyst at Kitco Metals.
According to cra cra cra cra Erlam, senior market analyst at OANDA, events at the Ukrainian border not only make investors seek safe havens, but gold also provides protection against inflation at the time of high prices and the prospect of higher oil and gas prices.
Gold has had a positive start to 2022, surpassing bonds and stocks as investors searched for safe places to deposit cash.
The crisis in Ukraine has created momentum for gold prices to increase, although analysts say gold also benefits from concerns that US growth may slow down as the Federal Reserve (FED) is forced to take positive action to control inflation.
Citigroup analyst Aakash doshi said that the possibility of monetary policy errors due to inflation and the risk of recession is supporting gold prices, and predicted that gold prices could reach 1,950 USD/ounce in the next three months.
Others predict stronger. Goldman Sachs believes that gold prices could surpass the record of $2,000/ounce reached in August 2020.
The US Bank said the relationship between gold and inflationally "real" interest rates is starting to weaken amid concerns about economic prospects and rising prices.
Normally, real exchange rates have the opposite relationship to gold. This is because higher interest rates make non-interest-bearing assets such as gold less attractive.
But that hasn't happened this year. When the actual exchange rate increases, gold prices still have the ability to recover.
As weaker US economic data begins to be released, we expect gold capital flows (exchange-traded funds) to accelerate as investors gradually move away from stocks to gold, said Goldman Sachs analyst Mikhail Sprogis.
There are signs that this is starting to happen. After falling in 2021, gold held by ETFs has risen 57.3 tonnes this year.
Goldman calculated that ETF flows could reach a total of 600 tons this year, equivalent to the average flows in 2016, 2019 and 2000, as concerns about recession are always present in investors' minds.
Central banks' interest rates on gold are also rising. Turkey added 1.6 tonnes to its reserves last month, while Poland said it could add 100 tonnes this year.
Escalating tensions between Russia and Western countries over Ukraine and the possibility of sanctions against Russia have raised concerns about the impact on the supply of key goods produced and exported by Russian companies, including gold.
The US and European countries have threatened to impose sanctions on Russia if it attacks Ukraine, which Moscow has repeatedly denied.
Russia is the world's third largest gold producer after Australia and China and accounts for about 10% of global mining output, reaching 3,500 tons last year, according to the World Gold Council.
Russian gold is produced by gold mining companies such as Polyus and Polymetal. Russian miners mainly sell their gold to the country's commercial banks, then export it.
According to commodity market experts, spot gold prices have hit the target range of 1,900 USD to 1,910 USD/ounce and there may be some adjustments due to profit-taking. They said that even after the Russia-Ukraine tensions ease, the worry of global inflation remains there and it will continue to push gold prices higher. They believe that gold prices could reach $2,000/ounce in the next 3-4 months.
