Gold within sight of US$2,035 record amid looming war in Ukraine while market’s ‘fear gauge’ jumps

Spot gold approaches an all-time high of US$2,000 per ounce on haven bids as Russia sends troops into breakaway regions in Ukraine

Aggressive Fed rate hikes could raise real yields on various assets, dimming the allure of gold that does not earn interest, according to ING strategist

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The yellow metal climbed to an eight-month high of US$1,940 per ounce on Thursday. Photo: Reuters

Published: 2:03pm, 24 Feb 2022Updated: 1:32pm, 9 Mar 2022

Gold prices are likely to test the record set in 2020 as heightened geopolitical tensions over a Ukraine invasion, runaway global inflation and stock market volatility fanned demand for safe haven assets, according to State Street Global Advisors (SSGA).

The yellow metal climbed to an eight-month high of US$1,940 per ounce on Thursday after President Vladimir Putin ordered Russian troops into two breakaway regions in Ukraine. Spot gold soared to US$2,035 in August 2020 as the pandemic sparked global recession fears and a rush into the safety of US government bonds.

The US, which described Russia’s move as a prelude to an invasion of Ukraine, has responded with several sanctions with its allies. US stocks entered a correction phase this week, as the S&P 500 Index slipped more than 10 per cent from its peak in January while a measure of market volatility rose to near a record.

Higher volatility and geopolitical risks “could trigger more demand for safe haven assets and benefit gold,” said Robin Tsui, Hong Kong-based Asia-Pacific gold strategist for SPDR ETF at SSGA. “Historically, where there has been a slump in equities, it would often coincide with an outflow from equities into gold.”

The S&P 500 lost 33.8 per cent during the depth of the Covid-19 pandemic in February-March 2020, while gold weakened 3.6 per cent, according to data from SSGA and Bloomberg.

Robin Tsui Chi-kit, Asia-Pacific gold strategist at SSGA Hong Kong. Photo: Handut

The VIX Index, which measures S&P500’s expected volatility and is also known as the “fear gauge”, stood at 31.02 on Wednesday, near the record 32 in late January. The five-year average is about 19.