Spot gold rallied to the highest level in more than a year on Thursday (Feb. 24) as safe-haven demand for the precious metal jumped after Russian President Putin launched a military operation in Ukraine and warned other countries that any attempt to interfere with the Russian action would lead to “consequences they have never seen.”
The Russian head of state declared what he called a “special military operation” early Thursday morning, just two days after sending troops into Donetsk and Luhansk in eastern Ukraine. Moscow recognized the independence of Donetsk and Luhansk, which triggered Western sanctions.
Gunfire and explosion were heard over night in Ukrainian capitol, Kyiv, according to media reports and Ukrainian President Volodymyr Zelenskyy declared martial law.
Spot gold advanced 3.17% to go for $ 1,968.01 per ounce at 10:30 a.m. in London, the highest since late 2020. U.S. gold futures were up 3.08% at $1,969.30 per ounce.
The price of the safe-haven asset is up about 8% in February thus far, on course for its biggest monthly gain since July 2020 as the Ukraine crisis walloped risk appetite.
Bullion is considered a hedge against inflation and geopolitical risks.
Ravindra Rao, CMT, EPAT, VP – Head Commodity Research at Kotak Securities in India told NDTV “Gold has moved up on safe-haven buying as Russia-Ukraine tensions intensified. ETF inflows also showed buying interest in the yellow metal. Gold may remain volatile as market players respond to development relating to Russia. Unless there are serious efforts to resolve the issue, safe-haven buying may keep prices supported.”
According to Frank Holmes, CEO of U.S. global investors, wars and geopolitical tensions have, in the past, provided tailwinds for gold and sees the bullion’s price climbing as much as 50% higher from current levels.
“It’s a non-event for gold to go up or down 20% in a year,” Holmes told David Lin, anchor for Kitco News.
In other commodities news, oil prices also jumped with international benchmark Brent crude and U.S. futures both surpassing $100 a barrel for the first time since 2014 as the escalation of the Ukraine crisis sparked fears of a disruption to the region’s critical energy exports.
West Texas Intermediate (WTI) futures were 8.7% higher to sell for $100.10 per barrel at at around 10:40 a.m. London time, while Brent gained more than 8.9%, going for $105.36 per barrel. Natural gas prices popped 6.1%.
In equities news, world stocks extend a selloff Thursday. Japan’s Nikkei 225 closed 1.81% lower while the Pan-european STOXX 600 sank 4.10% at 12:13 GMT. In the US, the Dow Jones plunged as much as 2.39% or 791 points at 6:07 am ET, as the S&P 500 declined 2.38% or 100 points, further into correction territory. The tech-focused Nasdaq 100 fell by 3.03% or 407 points.
All eyes will be on geopolitical developments today.