Gold Sees Volatility as Russia-Ukraine Conflict Rages

It was a shortened trading week as the New York Stock Exchange and U.S. bond markets were closed Monday, in recognition of George Washington’s birthday. It was a light week in terms of scheduled economic events, with little on the calendar until Friday. Friday would see the release of PCE inflation, core inflation, income, and consumer spending data. 

U.S. stocks were coming off a second straight weekly loss as tensions between Russia and Ukraine continued to dent risk sentiment for Tuesday’s open, driving major indices such as the S&P 500 into correction territory. 

These moves followed Russian President Vladimir Putin’s announcement that Russia would recognize the independence of the Luhansk and Donetsk regions of Ukraine. Metals were buoyed by geopolitical strife as investors rushed to safe haven assets. Silver started the trading week near $24.03, while gold remained near eight-month highs around the $1,912 mark. 

Tensions between Russia and Ukraine continued to escalate Wednesday, which drove the S&P 500 down by nearly 2% while the Dow shed 2.5%. Meanwhile, the bullion rally stalled as the U.S. announced additional sanctions on Russia, including a German-backed sanction on the Nord Stream 2 Pipeline. Following this, gold fell to around $1,890 an ounce, while silver prices held steady above $24.  

Panic set in late Wednesday, following a speech by Vladimir Putin and reports of a full-scale Russian invasion of Ukraine. Explosions were heard from the Ukrainian capital of Kyiv, as Russian units crossed the Ukrainian border from multiple points. 

As news of the invasion spread, metals surged. Gold jumped by 4.4%, briefly touching $1,973. Silver jumped by 6.7%, to seven-month highs near $25.60. On Thursday, U.S. equities survived an initial sell-off and ended the day in positive territory. By the end of trading, the S&P 500 was 1.4% higher and the Nasdaq Composite gained 3.3%.

 
On the same day, the U.S. and her European allies announced additional sanctions against Russian oligarchs, sovereign debt, and Russian financial institutions. Energy prices continued to soar, with Brent crude topping $100 a barrel for the first time in nearly eight years. 

Gold encountered intense volatility on Thursday, as prices dropped from recent highs to its weekly low of $1,887. Friday saw the release of economic data and a 5.2% rise in core PCE inflation, from January 2021. This marked the largest increase in the Fed’s preferred inflation gauge since 1983. However, consumer spending was 2.1% higher in January, which beat expectations of 1.6%. 

Bitcoin prices had been struggling in recent weeks, along with other risk assets. However, Bitcoin saw an 11% rise to around $39,000 on Friday as volunteer groups providing aid to the Ukrainian military raised over $4 Million in Bitcoin. 

Stocks were mixed Friday morning as investors monitored the conflict in Ukraine. Gold was initially higher at $1,918 an ounce. Gold whipsawing took place, leaving the yellow metal closer to $1,883, or 1.5% lower for the week. Silver prices followed a similar path Friday. Currently, silver is at $23.91, which is 0.49% lower for the week.