Golden opportunity: Safe haven asset soars following deepening market turmoil
Gold has maintained last week’s rally, with prices flirting with $1,860 per ounce following the escalation of geopolitical tensions between Russia and the West over the future of Ukraine.
Prices hit a three-month high on Friday, with investors turning to the asset as a ‘flight to safety’ measure following reports from Washington and London that a Russian invasion of Ukraine could be imminent.
Commerzbank analyst Daniel Briesemann said: “How the Russia-Ukraine conflict develops is likely to dominate events on the gold market this week. If the situation there does indeed escalate, the gold price is initially likely to climb further. “
Carlo Alberto De Casa – external market analyst, at Kinesis Money was unsurprised to see gold rebound after weeks of treading water below $1,830 per ounce, and break through the $1,835 threshold where it had previously suffered resistance.
He even suggested this could overpower the headwinds of rising inflation and the subsequent raising of interest rates from the Federal Reserve, with analysts anticipating between four and seven interest rate hikes this year.
Commenting on future performance, he said: “From a technical point of view, the rise above the resistance zone of $1,835 could be seen as a bullish signal, with the resilience shown last week after the U.S. inflation data now becoming a strength.”
Forecasting future price hikes, he suggested $1,875-1,880 per ounce represents the next milestone where there will be clear resistance.
This is a price gold has not reached since November.
Ricardo Evangelista, senior analyst, ActivTrades, recognised the markets “are reacting by seeking safe-haven assets” in a dynamic that strongly supports the precious metal, but he also argued monetary policy could weigh down rallies over the coming weeks.
He explained: “Gold gains are somehow limited by the other dominant narrative of the moment, the threat of inflation and the pace and timing of the US Federal Reserve’s monetary tightening. Investors remain alert to the possibility that the Fed is about to move decisively, and hike rates quicker and more often than previously expected.”