On Tuesday, March 8th, due to the US ban on imports of Russian oil and other energy, the price of gold hit a record high of more than $2070 an ounce.
Geopolitical uncertainty in Ukraine and new sanctions against Russia have created strong demand for gold. Analysts say investors see gold as a hedge against risk, inflation, economic shocks and additional geopolitical uncertainty.
Daniel Briesemann, an analyst at (Commezbank), a German commercial bank, said 55 tons of gold etf had flowed in since the war broke out in Ukraine.
In addition, this particular geopolitical conflict has spread to broader economic and inflation expectations, making its impact on gold more lasting.
U.S. president Joe Biden said Tuesday that he will ban all oil imports from Russia. "We will ban all oil, gas and energy imports from Russia," Biden said. " "this means that Russian oil will no longer be accepted by American ports, and the American people will carry out another powerful blow to Putin's war machine."
The British government also said it would ban oil imports from Russia.
"it is clear that refusing to import Russian oil will have disastrous consequences for the global market," Russian Deputy Prime Minister Nowak said in a statement issued by state television. " "the surge in prices will be unpredictable. If not higher, it would be $300 a barrel. "
Analyst Melek says the consequence of these developments is additional price shocks, with inflation much higher than previously estimated. "of course, there is not much that can replace Russian supply in the short term. I mean, the oil price could be $145, but it could be higher. "
For gold, this means increased demand, including more central bank purchases, which have a big impact on gold prices because of the trading volume usually involved.
This is because if inflation is factored into the record high of gold since the 1980s, the price of gold would reach $2927 an ounce, Melek said. "the nominal price in 1980 was about $850," he said. " "when I adjust for inflation, the price is $2927. If inflation is taken into account, this is the highest level in history. "
Given the possibility of central banks buying gold this year and the uncertainty of the Fed raising interest rates, gold prices are likely to reach this level.
Melek points out that gold is seen as a tangible asset that no one can take away. "I suspect that central banks have made a lot of purchases," he said. Russia's $600 billion in foreign exchange reserves has proved useless because its central bank has been sanctioned. The only thing that works now is physical gold. The personal experience is similar because your account will be frozen. If they cut off your network, you won't get the money. But no one has access to physical materials. "
In addition to this extra demand, inflation expectations are soaring around the world in response to commodity supply shocks.
"the Fed will face policy difficulties," Melek said. "if they take radical measures, will this really help curb inflation?" Not really. There are supply shocks. The impact of higher interest rates on inflation will come later. Moreover, supply is already negative, so it may not be wise to do so. The Fed's tightening is not enough to lead to a sharp rise in real interest rates. As a result, the price of gold is going higher. "
Daily chart of Brent crude oil
13:17 Beijing time on March 9th Brent crude oil continued to reach 130.84 US dollars per barrel.
