Russia-Ukraine tensions power gold to eight-month highs

Geopolitical worries fuel gains even as expectations for interest-rate increases weigh on the climb.

Gold prices have risen in 12 of the past 15 sessions. Picture: AP

Escalating tensions between Russia and Ukraine have boosted gold prices to their highest levels since June.

Gold has gained in 12 of the past 15 sessions, including seven straight through Monday, lifted by demand from investors nervous that an outbreak of war could spark losses in other investments. Investors prize gold for its stability in times of turmoil.

Most-actively traded gold futures hit $US1902 a troy ounce on Thursday, their highest settlement value since June 2, and ticked down 0.1% on Friday.

“Investors are looking for a geopolitical hedge,” said Matt Miskin, co-chief investment strategist at John Hancock Investment Management. “The stars are aligning in essence for a gold breakout.” Further increases in tensions could send gold above its August 2020 record close of $US2051.50 within months, Mr Miskin said. Bank of America analysts recommended in a recent note that investors should consider buying more gold if prices break out of a range between $US1860 and $US1880, also predicting the potential for new highs.

Investors put money into precious-metal mutual- and exchange-traded funds for the fifth consecutive week through Wednesday, according to data from Refinitiv Lipper. That marks the longest streak since early August 2020, when funds recorded net inflows for 20 consecutive weeks.

The recent climb has broken gold prices out of a 2022 rut. Expectations for rising interest rates have driven US government bond yields to pre-pandemic levels, sparking stock volatility while also reducing the appeal of gold, which doesn’t offer bonds’ regular payments.

Analysts expect those pressures to cap gold’s climb if tensions ease. Prices fell 0.7% Tuesday after Russia’s Defence Ministry said some troops on the border were returning to their bases, though large-scale military manoeuvres continued elsewhere.

“You can see just how sensitive gold is to the tensions at the moment,” said Suki Cooper, a precious-metals analyst at Standard Chartered. “Given that this move is being driven by short-term tactical interest, the price action is likely to be much more nimble as well.” Ms Cooper estimates gold will trade around $US1730 at the end of 2022.

Chris Vecchio, senior strategist at DailyFX, said the next key level to watch for gold is $US1919, where charts suggest resistance to further gains.

“Unless we have a World War III breaking out here, I don’t know that gold is able to sustain a bid up to those all-time highs,” Mr Vecchio said.

The Wall Street Journal