Russian Crisis Concerns Cause Gold to Stabilize Above Quarterly Low

Gold has seen a modest increase in price as more investment flowed into the safe haven metal amid concerns about the political turbulence in Russia. The precious metal has been a safe haven asset for individuals and institutions looking to preserve their wealth during times of political and economic turmoil for centuries now, primarily because it does not lose value.

However, despite several years of poor economic conditions, an energy crisis and a cost of living crisis, gold hasn’t performed as well as it could have as higher interest rates drove investors to other assets that earn interest. Recent events in Russia increased investor concerns and turned their interest to safe haven asset gold, causing spot gold prices to rise by 0.2% to $1,924.78 per ounce last week. Gold futures also went up by 0.2% to trade at $1,933.80.

Kitco senior analyst Jim Wyckoff said that the short-lived Russian incursion resulted in “modest safe-haven demand” for gold. Still, the analyst notes that the world is still unsure of what will happen next in Russia as the country’s military seems to be destabilizing more than a year after it invaded Ukraine and initiated the largest conflict in Europe since the second world war.

With the Russian military taking major losses in Ukraine and the mercenary company Wagner Group’s recent mutiny, President Vladimir Putin’s two-decade rule may be in jeopardy.

Russia is a significant player in critical industries such as oil, natural gas and fertilizers, meaning extended political turmoil in the country will undoubtedly affect the global economy. StoneX analyst Rhona O’Connell notes that the events in Russia breathed some life into gold and gave it “minor buoyancy.” Furthermore, O’Connell said that China’s return to the market after the three-day long Dragon Boat holidays lent some support to the gold market.

Gold bullion was down by 2% last week and reached its lowest price point since mid-March as hawkish comments from Fed officials indicated another interest rate rise to combat inflation. High-interest rates tend to reduce investor interest in nonyielding gold because it does not offer interest.

As interest rates rise, more investors will choose to invest in assets that earn interest instead of gold, which is more adept at preserving value in times of economic upheaval. Silver also went up by 1.8% to trade at $22.81, while platinum rose by almost 1% to $925.99 and palladium increased by 2.2% to $1,312.40.

This modest recovery in the price of gold is likely good news for industry players such as Newmont Corporation (NYSE: NEM) (TSX: NGT) that supply a sizeable amount of the gold available on the market.

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