Gold surfs wave of risk-off trade as Russia invades Ukraine

Bengaluru — Gold prices surged more than 3% on Thursday and palladium led a rally in precious metals, as Russia’s invasion of Ukraine ratcheted up the fear of a war in Europe and drove investors away from riskier assets and into safe havens.

Spot gold climbed 3.4% to $1,971.54/oz by 10.18am GMT, the highest since September 2020. US gold futures jumped 2.4% to $1,956.00.

Russia launched an all-out invasion of Ukraine by land, air and sea on Thursday, confirming the worst fears of the West with the biggest attack by one state against another in Europe since World War 2.

“There is obviously safe-haven demand coming into the [gold] price, but this crisis is very inflationary because it’s adding upward pressure on commodities prices ... it is recessionary as well in terms of the growth perspective,” Saxo Bank analyst Ole Hansen said.

Oil prices shot up and stock markets slumped on Thursday as the situation worsened.

Gold has risen more than 9% in February so far as the Russia-Ukraine crisis hammered risk appetite. The metal is headed for its best monthly performance since July 2020.

Autocatalyst palladium jumped more than 7% to $2,665.99/oz, its highest since August 2021.

Palladium’s rise is a natural reaction to Russia being a big supplier of the metal, Hansen said. “The only thing that potentially could counter is the risk of recession, especially in Europe and Germany, which is such a big producer of automobiles.”

Russia is the world’s third-largest producer of gold, while Moscow-based Nornickel is also a major producer of palladium and platinum.

“A protracted escalation could see gold rising to or above $2,000/oz in the short term,” UBS analyst Giovanni Staunovo said. “While the PGMs [platinum group metals] platinum and palladium are supported on metal availability concerns.”

Silver surged 4.2% to $25.56/oz and platinum rose 2.7% to $1,121.10.

Reuters