Gold and silver prices have started the week stronger following their recent sell-off. Escalation between Ukraine and Russia has reversed gold’s fortunes after two weeks of market attention focused on the US election.
News that outgoing President Joe Biden has authorised Ukraine to use long-range missiles against targets inside Russia marks a major new step in the conflict. So far, there has been no official response from Putin, but previous comments suggested the use of long-range missiles in Russia would be considered a significant escalation and involvement of NATO in the war.
This follows Russia’s recent deployment of North Korean troops on the frontline, another escalation of its own. How the Kremlin reacts, and how incoming President Trump will respond himself when he takes the reins in January, remains to be seen, but the events have sparked safe haven buying.
Gold is up around 1.6% so far today in USD (1.5% in GBP, and 1.2% in Euros), as markets react to the current escalation, and will be watching keenly for Ukraine’s use of the missiles and Russia’s response. Having fallen as low as $2,538.04 per ounce last week, gold has retaken $2,600 this afternoon.
Silver has also recovered by 2.7% today, jumping back above $31 per ounce after slumping to $29.71 last Thursday. After a very strong month due to the US election, the rally in the US dollar index has been stopped in its tracks, and appears to be stabilising for now.
After a fortnight of trading on the Trump victory, this has been a reminder to markets that the world remains fraught with challenges, and that the incoming President will have to face these challenges from January. How Ukraine use these missiles, and how Russia respond are going to be key in the coming weeks, and could help gold recover further from its recent weakness.
