Tensions in Ukraine intensified further in the last 24 hours, with Vladimir Putin ordering troops into two Russian supporting areas of the country.
Gold bullion, traditionally a haven for money in times of crisis jumped on the news and briefly moved above US$1,900 on 21 February and within reach of the US$2,000 an ounce landmark.
The price of gold has increased from US$1,829 per ounce at the start of the year and the current geopolitical situation has added a level of support to gold bullion according to Giles Maber, director of sales at gold specialist Sharps Pixley.
Maber believes that tensions have changed the long-term fundamentals of gold, evidenced by it bouncing back from a low this year of US$1,780 following a hawkish statement from the US Federal Reserve late in January.
Should the West impose more sanctions on Russia there is the opportunity for gold to climb even higher given that it was the world’s second largest producer of gold last year, according to Goldhub.
But it isn’t just Russia’s imminent invasion of its neighbour that has seen the price of gold rise.
Inflationary issues and a lack of trust in central banks to effectively manage inflation have also helped the recent rally, with Sharps Pixley claiming total January revenue sales were up 120% compared to January 2021.
Maber adds “Our clients don't think that central bank policy is going to be able to grasp and control inflation, so we've seen a lot of new clients who are moving money held in bank accounts to buy bullion.”
A clear beneficiary of investors turning to gold would be miners.
According to Baker Steel, a specialist gold mining trust, “The case for investors to increase exposure to commodities and miners is growing stronger, as the sector offers diversification, undervaluation and a strong growth outlook.”
That case will be strengthened should outright war break out and inflation continue to spiral out of control, it adds.