Investors continue to put money in gold as Russia-Ukraine tension still remains high and attempts to reach an agreement has failed which could push yellow metal towards $2,000, say analysts.
“Gold prices rise along with US Treasury yields, indicating that investors are putting their money into gold as an inflation hedge. Although it is ironic for gold prices to rise despite high chances of a 50-bps hike, it may be due to the Fed chairman Jerome Powell’s comment that the economy is strong enough to withstand aggressive interest rate increases,” he said.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said the new sanctions on Russia may not include a ban on European oil imports from Russia, but it well includes a ban on Russian gold, as there were signs that Moscow was using gold to go around the sanctions.
“To stop that, the US issued a notice that gold transactions with Russia are now prohibited, which requires US people and companies to stop dealing with sanctioned Russian entities in an effort to further hammer the ruble’s power. The Russian gold ban certainly comes as a response to Russia asking the ‘unfriendly’ countries to buy their oil and gas in rubles,” said Ozkardeskaya.
Russia has been building strong gold reserves since 2014 and the central bank is thought to have between $100 and $140 billion in gold reserves, which they may no longer use to convert against currencies that they can still trade, said Swissquote Bank analyst.
“The news shouldn’t have a negative impact on gold’s value, if anything we shall see the yellow metal extend gains toward the $2,000 on escalating tensions and looming uncertainties,” he added.Source: