Gold behaves unpredictably as the Ukraine conflict evolves

Inflationary pressures will likely continue to spiral higher as the Russian invasion of Ukraine continues. Russia produces roughly 10% of global oil production. Yesterday crude oil futures moved just above $100 per barrel before settling off of those highs just above $93 per barrel. Also there a high probability food costs continue to rise adding to inflation.

The European Union in unison with the United States and Canada began to place sanctions against Russia for their premeditated attack and invasion of Ukraine, a sovereign country. According to Bloomberg News, “Global condemnation of Vladimir Putin quickened, with the U.S. poised to apply personal sanctions on the Russian leader, as his troops pushed toward Ukraine’s capital and he urged its military to mutiny.”

It has also been reported that the United States plans to sanction Vladimir Putin directly because of his orders to launch a full-scale invasion into Ukraine. However, most analysts as well as President Biden acknowledged that the sanctions will not have an immediate impact and could take months before they affect the Russian economy.

Gold’s price swings have been dramatic over the last few days. On Friday gold traded to a high of $1976.50 before falling dramatically and settling at $1905, coupled with today’s $37 decline resulted in a decline of gold prices on the week.  Analysts have said that the pullback from Thursday highs was simply a round of technical profit-taking.

Analysts believe that the recent price drop signals a further price decline in gold is jumping the gun. Daniel Briesemann an analyst at Commerzbank said it most eloquently, “We think the price drop is premature, there is a risk of further escalation in the conflict and it could be just a temporary correction.”

What is quite clear is that the likelihood of a diplomatic solution or a conclusion to the current military actions will not unfold quickly. The Russian Ukraine war could spiral into major destruction, hardship, and death of the Ukrainian people. Putin has proclaimed that Russian military action will not end until the Ukrainian military lays down their weapons and the political administration in Ukraine is toppled and replaced by politicians that are pro-Russian.

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