Posted 14th March 2022

Gold Dips on Expectations of Fed Rate Hike But Ukraine Situation Ensures Fresh Gains Still Possible

gold news feature 14 march

While the war in Ukraine continues to be a central focus for investors this week, the Federal Reserve’s upcoming interest rate decision will be the first macroeconomic event to gain any real traction since Russia’s invasion of Ukraine started a few weeks ago. 

The US central bank is almost certainly going to announce a 25 basis point increase in its interest rate on Wednesday to tackle rising inflation, the first change since the coronavirus pandemic began.

This highly trailed move has put pressure on gold, with its lack of yield making gold less attractive in an environment of rising interest rates, with the price falling away from the highs achieved last week with the precious metal now trading comfortably below $2,000 an ounce. 

gold kinesis exchange kau
Gold ($/g) Chart from Kinesis Exchange – 15 minutes – Gold falls back to around $63 per gram

Yet while gold’s recent surge may have stalled, the fragility of market confidence amid the ever-worsening situation in Ukraine means that future gains are still possible.

News over the weekend of Russian airstrikes attacking places very near to the Polish border is a stark reminder of how easily this desperate attack on the people of Ukraine could quickly escalate into a much broader conflict in which Western superpowers would be forced to act.

Similarly, reports of Russia seeking China’s help to bolster their military resources show how global this Ukrainian war is in danger of becoming. 

In this context, future gains for gold, the ultimate safe-haven asset that has endured through hundreds of wars, cannot be ruled out.

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