Gold soars as Russia invades Ukraine

25 February 2022

Friday 25 February 2022

In this week's market report:

Gold soars as Russia invades Ukraine
Au reached 15-month high
Gold outperforms equities during market turmoil
Flight to safe haven assets

Dear Investor,

US dollar gold price [XAUUSD] 23rd February to present - 5 minute

Source: Blomberg; Updata; ABC Refinery
(Click to enlarge)

Gold soars as Russia invades Ukraine: President Vladmir Putin ‘authorised a military operation in the Eastern European country’ writes ABC News. Gold is higher by 0.28% overall in the past seven days, however yesterday’s trading (Thursday 24^th February) was extremely volatile with a trading range of US$96 per ounce.

News of Russia’s first missile strike saw gold leap nearly 1% in five minutes, with the yellow metal extending to an intra-session high of US$1,974 shortly after Russia’s second missile assault.

Au reached 15-month high: Overnight gold touched a 15-month high. Gold has since retreated to US$1,904 per ounce.

Gold’s war premium: Gold’s current rally has similarities to Russia’s annexation of Crimea in February 2014. During this period, gold rose over 6% in the first 14 days of news of

Russia’s potential invasion of Crimea, only for the yellow metal to quickly give up the gains and then some once the invasion was complete.

Expanding on gold’s behaviour during times of conflict, Global General Manager of ABC Bullion, Nick Frappell said ‘it’s typical for gold for fall on the geopolitical fact, which is why gold is difficult to trade upon unfolding news of military action’. Spot gold fell US$96 from the overnight high before recovering to US$1,904 per ounce at the time of writing.

Silver and palladium jump on missile strikes:

Silver is up 2% for the week, spiking as high as US$25.61 on Thursday.
Platinum is down 2.87% to US$1,063.
Palladium is 2.79% higher for the week overall. A volatile trading session yesterday gave Pd a wide trading range, spiking to a 7-month high. Pd has since fallen and is resting at US$2,428.

Bulls, is US$2,000 possible? Credit Suisse says gold may reach US$2,075 in the coming months.

Bears, gold will look for past support: Be wary of weary news driven markets. A fall to retest support near US$1,800 can’t be ruled out.

Gold in Australian dollars heads for AU$2,700: Volatility created a wide AU$130 trading range on Thursday. The Australian gold price reached an intra-day high AU$2,753 per ounce, a high not seen since August 2020. The Australian gold price has since settled into the AU$2,660s.

Gold outperforms equities during market turmoil

Recent geopolitical events could potentially trigger investors to move to safe haven assets, like gold. Gold has outperforms several significant market events since 1987, with Robin Tsui, an Asian Pacific gold strategist for SPDR ETF saying, ‘Historically, where there has been a slump in equities, it would often coincide with an outflow from equities into gold.’

Gold compared to US equities

Source: Bloomberg; State Street Global Advisors; SCMP
(Click to enlarge)

Flight to safe haven assets

From Bloomberg:

‘Gold surged to the highest since 2020 after Russian forces attacked targets across Ukraine, triggering the worst security crisis in Europe since World War II and crushing risk sentiment.

‘President Vladimir Putin vowed to “demilitarize” Ukraine and replace its leaders, while the West threatened additional sanctions in response. U.S. President Joe Biden announced he would impose “further consequences” on Russia after what he called an “unprovoked and unjustified attack.”

‘The move sparked a flight to haven assets, with European stocks and U.S. futures dropping while Treasuries rallied. Gold jumped the most in almost two years, even as the dollar strengthened. Bullion priced in euros hit an all-time high.

‘“The Russian invasion of Ukraine puts the markets in panic mode,” said Alexander Zumpfe, senior trader at refiner Heraeus Metals Germany GmbH & Co. “Investors are throwing shares out of their portfolios and fleeing to safe havens.”’

Inside our office this week…

The surging gold price has seen our 50g ABC Bullion Gold Cast Bar has been very popular this week. Click here to buy yours now.

Before you go

This week, I talk to Andrew Naylor, Regional CEO of the World Gold Council.

Today we talk about the key drivers of demand of gold their recent analysis of why gold should part of Australian’s superannuation. Click below to watch the video now.