Gold price near 8-month high as Ukraine-Russia conflict escalates

Gold price is trading close to the 8-month high hit in early Friday trading. The precious metal surged above $1,900 on Thursday, for the first time since June 2021, amid escalated conflicts in eastern Europe.

Russia-Ukraine conflict

Geopolitical tensions in eastern Europe have continued to boost gold’s safe-haven demand; an aspect that has driven the precious metal to an eight-month high. Earlier in the week, news from US officials indicated that a Russian attack on Ukraine was imminent. The announcement boosted gold price from an intraday low of $1,820.78 on Friday to $1,880.12 on Tuesday.

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Evidently, the precious metal has been moving in tandem with developments on the Ukraine-Russia conflict. As such, the announcement by Russia’s defence ministry that some of the Russian troops were returning to their bases away from the Ukraine border eased gold’s rallying.

Interestingly, the conflict has escalated as Ukraine forces and Russia-backed rebels traded accusations about ceasefire violations in eastern Ukraine. This comes at a time that international powers have insisted that Russian invasion is probable in coming days.

In the ensuing sessions, gold price will likely exhibit heightened volatility as investors remain keen on the geopolitics in eastern Europe. Physical evidence that Russia is leaving the Ukraine border will likely ease gold price rallying. However, heightened tensions may give the bullion bulls an opportunity to retest May 2021’s high of $$1,917.20 or higher to a thirteen-month high of $1,961.91.

Fed monetary policy

The market is still reacting to the less hawkish cues from January’s Fed meeting minutes. The minutes, which were released on Wednesday, did not avail additional hawkish clues. On the one hand, the policymakers acknowledged that it will “soon be appropriate” to hike interest rates. Nonetheless, they indicated the need to re-access the the timeline for interest rate hikes during each meeting going forward.

An environment of higher interest rates tends to increase the opportunity cost of holding the non-yielding bullion. As a reaction to the FOMC meeting minutes, the benchmark 10-year Treasury yields dropped from 2.06% to the current $1.96%. The lower US bond yields have been a bullish driver of gold price.With the probable rebound in the ensuing sessions, the precious metal may be subject to price swings.