Gold is undervalued because of inflation not because of Ukraine Invasion - Heraeus

NEW YORK (Mar 1)  The gold market remains extremely volatile as traders and investors continue to react to Russia’s ongoing invasion of Ukraine.

Although gold is seeing strong safe-haven demand due to the conflict in Eastern Ukraine, European precious metals firm Heraeus said that investors would do better to focus interest rates and rising consumer prices.

After jumping 2% Sunday evening, gold prices have fallen from their highs and are holding support just above $1,900 an ounce. April gold last traded at $1,905.30 an ounce, up 1% on the day.

In a report published Monday, analysts at Heraeus, said that while gold prices can push higher as safe-haven asset to protect against geopolitical risk, these gains are not sustainable. The European precious metals firm noted the last conflict in Ukraine when Russia annex the Crimea region in 2014.

“The price rallied while tensions built, but declined once the annexation had occurred,” the analysts said. “There is still uncertainty over how long the crisis might last, and that could keep the gold price supported for a while. However, once the situation in Ukraine stabilises, the gold price could slip further.”

Looking past the ongoing war in Eastern Europe, analysts at Heraeus said that gold still faces difficult headwinds as the Federal Reserve looking to tighten interest rates to combat rising inflation.

KITCO