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Gold supported by renewed hostilities

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Written by:
Myrsini Giannouli

05 April 2022
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Gold price climbed above $1,936 per ounce on Monday, supported by reports of violent Russian attacks against Ukraine and the possibility of new sanctions on Russia. If the price of gold decreases, support may be found near 1,877 per ounce, while resistance may be found at around $2,000 per ounce. 

Gold has been supported by the conflict in Ukraine, which has triggered a risk-aversion sentiment, driving investors towards safe-haven assets and propelling the price of gold to $2,050 per ounce last month. Sanctions against Russia have also been driving commodities up, especially energy-related commodities, contributing to rising inflation. The price of gold benefits from rising inflation, since it is often used as an inflation hedge. 

Last week though, reports of advancing peace negotiations between Russia and Ukraine put pressure on the price of gold. In case the crisis in Ukraine is resolved, sanctions against Russia will likely be lifted, reducing the disruption of global commodity and energy supply chains, decreasing global inflationary pressures, and driving the price of gold down. A de-escalation of the crisis still seems to be some way off, however, and attacks against Ukrainian cities were renewed this week.

Gold’s safe-haven status boosts its price, although rising USD and Treasury yields are keeping its price from increasing further. The USD and US treasury yields climbed on Monday putting pressure on the price of gold, with the 10-year treasury yields rising above 2.4%, as investors anticipate a more aggressively hawkish Fed policy. Real yields compete directly with gold, which is a non-interest-bearing asset, and their rise puts pressure on the price of gold.

XAUUSD 1hr chart

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Written by:
Myrsini Giannouli

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