Scan to Download ios&Android APP

Gold futures untarnished as Russia invades Ukraine

22:25, 23 February 2022

Share this article
In this article:
  • Gold

    1811.12 USD
    3.25 +0.180%
Tags

Have a confidential tip for our reporters?

A Russian soldier in front of a tank
Russia's invasion of Ukraine is prompting investors to buy gold - Photo: Shutterstock

Gold futures contracts gained nearly 0.20% on Wednesday as global markets continued reacting to the Russia-Ukraine crisis.

The market continued to advance after shattering the $1,900 an ounce price level by mid-morning Wednesday. By the afternoon, prices fluctuated around the $1,910 mark leading some analysts to predict the precious metal could reach anywhere between a $1,920 to $1,950 price point soon.

On Tuesday, contracts had dropped to $1,890 an ounce. Before the US markets opened, Commerzbank said in a note to clients on Wednesday that gold prices are likely to “continue climbing” if there is a military conflict between Russia and the West.

Evaporating hopes

Optimism has faded in a diplomatic solution to the Russia/Ukraine crisis. This has prompted investors to run toward safe havens, said Edward Moya, senior market analyst for OANDA.

The gold trade is an easy one right now as geopolitical tension will continue to drive inflationary pressures to the next level, which will feed into aggressive Fed tightening calls that will threaten financial conditions and ultimately economic growth,” he told Capital.com in an interview.

Gold prices today represent a reverse of the old adage with investors having sold off on rumours of a Russian invasion and are now buying back in on the understanding that conflict in Ukraine is a grave geopolitical crisis rather than an economic one, theorised Rupert Rowling, market analyst for Kinesis Money.

Fragile state

However, Rowling said this would be a “bold step” to take given the fragile and still relatively nascent nature of the economic recovery from the coronavirus pandemic.

“Gold’s price reaction today reflects the confused state of mind on markets with the impending armed conflict between Russia and Ukraine resulting in gains on equities and gold – the time-honoured safe haven assets at times of crisis and war – slipping back,” he told Capital.com in an interview.

What is your sentiment on Gold?

1811.12
Bullish
or
Bearish
Vote to see Traders sentiment!

Another consideration is that while gold is an established haven asset, it is also a non-yield bearing one, and while the current focus is understandably on Ukraine, the wider economic outlook points to a situation in which interest rates will increase throughout the year, providing a brake on how far gold can climb, he said.

Both analysts said if the Russia/Ukraine situation worsens, gold could reach a high of $1,950 an ounce.

Read more:

The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
Capital Com is an execution-only service provider. The material provided on this website is for information purposes only and should not be understood as an investment advice. Any opinion that may be provided on this page does not constitute a recommendation by Capital Com or its agents. We do not make any representations or warranty on the accuracy or completeness of the information that is provided on this page. If you rely on the information on this page then you do so entirely on your own risk.

Still looking for a broker you can trust?


Join the 400.000+ traders worldwide that chose to trade with Capital.com

1. Create & verify your account

2. Make your first deposit

3. You’re all set. Start trading