Gold prices pushed higher on Monday, fuelled by ongoing geopolitical concerns and rising inflation.
The safe-haven asset saw prices hit two-months high last week, before falling back slightly. But as tensions between Russia and Ukraine continued to mount over the weekend, the precious metal once again started to push higher and by 1330 GMT on Monday US gold futures – which began the year trading around $1,800 an ounce – were ahead 0.3% at $1,837.9.
Further un-nerving investors is rising inflation. Prices have been increasing sharply around the world as economies reopen following the worst of the Covid pandemic, with the UK’s rate of inflation now at a near 30-year high.
The Bank of England has already increased interest rates to try and tackle the soaring rate, with more rises forecast, while the US Federal Reserve is expected to start tightening monetary policy at a faster pace than previously thought in response.
“Gold has bounced back from a minor correction to continue trading around $1,840. High US inflation, Russia’s intensifying aggression towards Ukraine and concerns over China in Taiwan are all supporting the metal. Analysts expect severe sanctions to be imposed on Russia if Putin overthrows the Ukrainian regime, with a wider global economic ripple effect anticipated,” said analysts at finance house SP Angel.
Naeem Aslam, chief market analyst at Avatrade, said: “Gold prices moved up last week following turmoil in broader financial markets, forcing investors to take shelter and invest in safe-haven commodities.
“However, investors should understand that the upcoming interest rate hikes to be carried out by the Fed are likely to make it difficult for the yellow metal to maintain itself above the $1,800 mark, as rising rates increase the opportunity cost of holding the precious metal, making it less appealing for investors.”
