The conflict in Ukraine has worsened sharply with Russia’s shelling of Zaporizhzhia nuclear power plant, the largest in Europe, suddenly raising the alert of this military invasion escalating into a nuclear war.
As a result, the G-7 foreign ministers are meeting today while UK Prime Minister Boris Johnson is calling for an immediate meeting of the United Nations Security Council.
This nuclear element and all the worst Cold War fears it reawakens, has understandably cast a vast cloud over any macroeconomic event. So while on a typical Friday, investor attention would be on the release of US non-farm payrolls, which are forecast to show another strong month of employment figures in February. Indeed, the economic outlook looks healthy with positive industrial construction data published today by France, Germany and Italy.
Yet in a clear sign of how concerning globally the war in Ukraine is, stock markets are plunging again with the Euro Stoxx 500 sinking to a 12-month low amid another day where global indices are a sea of red.
Gold Price Analysis
Gold has been one of the few beneficiaries of the dreadful scenes in Ukraine with investors rushing to safe havens at a time of crisis. But while the price is now trading at around $1,940 an ounce at levels not seen for 14 months, it has failed to climb noticeably higher despite the dramatic escalation in the Ukrainian conflict with Russia’s shelling of Europe’s largest nuclear power plant.
This suggests that macroeconomic factors are still playing a key role in investors’ attitudes towards gold with Federal Reserve Chairman Jerome Powell reaffirming the US central bank’s intention to raise interest rates later this month, starting off a series of hikes to tackle inflation. While the Fed will have to tread “carefully” given the situation in Ukraine, this confirmation of interest rate hikes is putting a ceiling on gold, with its lack of yield making it less attractive in a climate of rising interest rates.
Silver Price Analysis
Silver looks to have found its ceiling for the time being with the precious metal now trading comfortably above $25 an ounce but failing to break through resistance at around $25.60. After a similar push in November broke down at similar levels, silver’s upward momentum on the back of the rush to haven assets looks to have stalled. Yet for investors who have held silver since the start of the year, it has still been a rewarding couple of months with the price having gained almost $3 an ounce.
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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.