Gold smashes $2000 barrier as investors rush for steady ground
Gold prices surged to their highest level since August 2020 this morning as investors rushed for steady ground amid another day of global market turmoil.
Prices in the traditional safe haven asset peaked at $2001 (£1523) per troy ounce, smashing the $2000 barrier for the first time since August 2020 when pandemic fears rattled investors and caused a spike. At 18:30 GMT gold was trading at around $1991.
The surge in price today follows the biggest weekly rise in bullion price since July 2020 which analysts say reflected gold performing its traditional safe haven role amid the volatility.
“The surge in the gold price and the movement of the EUR-USD exchange rate both reflect the high risk aversion among market participants. This is also evident in sharply falling stock markets,” said Daniel Briesemann, an analyst at Commerzbank.
“The situation in Ukraine is escalating ever further: Russian President Putin said at the weekend that the economic sanctions imposed by the West were tantamount to a declaration of war. Given this backdrop, investors are likely to continue to seek refuge in the safe haven that is gold.”
Gold exchange traded funds tracked by Bloomberg registered further inflows of nearly eight tons on Friday in a week that saw inflows of almost 42 tons.
Analysts have warned that any escalation of the war could risk tipping the global economy into a stagflation scenario which would push gold prices further north.
Ricardo Evangelists at Activtrades said: “A scenario where energy prices continue to climb, as an embargo on Russian exports becomes increasingly likely, is emerging as a realistic prospect, that could aggravate global inflationary pressures and trigger a global recession,” he said.
“As the dark clouds of stagflation loom in the horizon, there is scope for gold price gains.”
But research analysts at Julius Bauer urged caution in viewing gold as an asset immune from volatility altogether.
“Investors who see the potential for worsening could seek some protection in gold, but need to be aware that prices will likely retreat if their assumption does not hold true,” said Carsten Menke, head of next generation research at Julius Baer Group Ltd.
Palladium, another precious metal turned to by investors as a safe haven asset, similarly soared 14 per cent this morning and posted a new record high of $3,440 per troy ounce.
Russia accounts for 38 per cent of global palladium production but Commerzbank said possible supply outages were still being “priced in” on the palladium markets, despite the fact a potential supply deficit would not be able to be offset elsewhere.
“The market risks sliding into a sizeable supply deficit,” Commerzbank warned.
The soaring prices came as global equity markets dipped this morning amid rumblings that the US and allies were discussing banning exports of Russian oil.
US secretary of State Anthony Blinken said the measures were currently being discussed, sending oil prices to $139 a barrel and global stock markets lower.
The FTSE 100 fell as much as 2.67 per cent, while the US’s S&P 100 fell 1.32 per cent this morning.