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.
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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Rupert is a Market Analyst for Kinesis Money, responsible for updating the community with insights and analysis on the gold and silver markets. He brings with him a breadth of experience in writing about energy and commodities having worked as an oil markets reporter and then precious metals reporter during the seven years he worked at Bloomberg News.
As well as market analysis, Rupert writes longer-form thought leadership pieces on topics ranging from carbon markets, the growth of renewable energy and the challenges of avoiding greenwash while investing sustainably.