As Russia continues to invade Ukraine a lot of other commodities have reacted, most importantly gold and oil have shot up over the last couple of weeks. Global financial markets have been on a sour note at the beginning of the second quarter of 2022, particularly over the Easter Weekend. This had a significant impact on the liquidity of precious metals like gold.
Gold is currently trading at just over $1,980 an ounce and will continue to move in a positive direction if inflation persists and the cost of energy rises. In Europe, equities slipped and the Japanese currency, the Yen fell to its lowest level in 2 decades amid the economic cost of inflation and the impact of what is going on in Ukraine. Currently, the situation between Russia and the Ukraine is still strained and western economies continue to stand behind Ukraine by supplying aid and imposing sanctions against Russia. The important port city of Mariupol was one of the first to fall. If Russia attacks port cities, it will make it harder for Russians to trade with the outside world. This destabilizes the economy. This is not something that only Russia’s poor will suffer for but it will affect a whole host of countries.
Why gold, why now? With high interest realized by bonds over time, the past performance of gold in similar economic climates, and bond yields being at multi-level highs, the price or value of gold investments looks set to have a good run for a while longer. Already the global stock markets have been struggling and have managed to drop ever so slightly in April.
The Yen’s latest decline has hit Japanese investors particularly hard but it has pushed the gold price above ¥8,000 a gram. That is almost double what the gold price was in mid-2018 when the latest bull market started.
According to the governor of the Bank of Japan, Haruhiko Kuroda, the country is fighting a war against deflations and the recent economic problems have driven the costs of imports – something that weighs heavily on the economy of this Asian nation. The Government has vowed to take stronger measures to maintain its monetary stimulus by decreasing household income and real corporate profits.
There are economic analysts in Australia that believe that the rising stagflation will push more investors to gold and safe haven assets like it. If the demand outstrips the supply and we are caught in this perpetual economic crisis, gold might go way above $3000.
In the U.K, Britain inflation has hit a high that hasn’t been seen in 3 decades. With inflation this high, and the British Prime Minister being embroiled in the party gate scandal which saw the British Prime Minister refusing to resign for flouting his own Covid lockdown regulations. The Country is also still suffering from the aftermath of Brexit.
The Euro/Gold price also rose briefly to €1830 an ounce ahead. The European Central bank has been expected to keep its interest rates low and taper quantitative easing bond-buying as inflation continues to rise and the cost of living gets continues going up.
Whilst China was upbeat about its economic recovery but the data wasn’t that spectacular. China which is the second-largest economy grew 4.88 percent year-on-year in the first quarter of 2022 topping expectations. However, the country has experienced a fall in retail sales as the nation once again had to put lockdown measures to deal with the resurgence of another COVID-19 strain.
Overall, whilst everything seems to be shot to hell in a handbasket, gold is the one thing that has kept on shining. Through the grimness of pandemics, declining currencies, inflation, and a lingering recession, gold investors are set to benefit the most from the current grim state of life.
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