Gold and Silver Rise with Russia, Ukraine Tensions

As the week began, investor risk-sentiment was hinging on several factors such as developments near Ukraine, inflation, and Fed action amid said inflation. Tensions between Russia and Ukraine continued Monday, resulting in a stock market slide to start the week.

On the same day, some officials in the U.S. warned that a Russian invasion of Ukraine could occur at any time. This caused a jump in energy prices, with oil prices touching seven-year highs.

Gold and silver were little changed by Monday’s close, near $1,868 and $23.63, respectively. This changed on Tuesday, when reports surfaced claiming that some Russian units had pulled back from the Ukrainian border. As tensions eased slightly, bullion and the dollar both dipped.  

Silver dropped by 3.6% as gold eased off eight-month highs, to its weekly low of $1,846. While metals dove on Tuesday, stocks in the U.S. rallied. The S&P 500 finished 1.5% higher, while the Nasdaq closed 2.4% higher. The benchmark 10-year Treasury yield was also higher near 2.045% which further pressured bullion.

By Wednesday, gold had re-gained some ground, but investors were eyeing FOMC January meeting minutes which were set to be released by 2:30 PM (ET). The minutes revealed that most participants favored an end to asset purchases by March.

Fed meeting participants also signaled a significant reduction to the Fed balance sheet, although no specifics were provided. It seems likely that the central bank will pursue a rate hike of 25 basis points in March. In other words, there was little-to-no surprise stemming from the January Fed meeting.

Stocks were mixed following the release of the FOMC minutes. Meanwhile, gold and silver firmed amid continued tension surrounding Ukraine. Gold ended Wednesday higher, near $1,869, while silver ended the day closer to $23.51.

Safe havens found more favor on Thursday, amid heightened Russian/Ukrainian concerns. Russian-backed separatists and elements of the Ukrainian military leveled accusations that the other had broken a ceasefire agreement near Ukraine’s eastern Donbas region.

Following this, and warnings from the Biden administration of an “imminent invasion”, gold briefly touched the $1,900 mark. This was significant, given gold hadn’t been this high since January of 2021. While bullion saw gains on Thursday, stocks plummeted. The Dow saw its worst drop of 2022, while the S&P 500 and Nasdaq both fell by more than 2%.

Stocks were mixed Friday morning, as investors saw potential in a diplomatic solution to Russia/Ukraine tensions. Russian Foreign Minister Sergei Lavrov agreed to meet with U.S. Secretary of State Antony Blinken next week, in order to discuss solutions to the unfolding conflict around Ukraine.

Bitcoin was also attempting to pare losses on Friday, as it fell with other risk assets on Thursday. Bitcoin prices fell by nearly 8% on Thursday and is currently near $40,330. While higher in February, Bitcoin is down 11% year-to-date.

Stocks were mixed Friday, while metals firmed. Silver is currently hovering near the $24 mark, which is 1.6% higher for the week. As this is written gold is at $1,895, which would be a 1.9% weekly gain.

For this week, it’s clear that geopolitical developments were the main drivers of bullion prices. When tensions eased on Tuesday, gold prices did as well. It seems likely that investors will eye next week’s meeting between U.S. and Russian officials, when determining near-term risk appetite.