Gold Prices Drop As Investors See Hope For Peace In Ukraine

The price of gold dropped Monday after news that Russian forces were pulling back. However, investors may be placing hope before reality

The SPDR Gold Shares exchange-traded fund, which tracks the price of bullion, dropped more than 3% from Friday’s close to Tuesday’s opening. The move reflects optimism that perhaps the month-old war may soon be over.

“This seems to suggest that gold’s decline reflects the moderation in the markets’ worries about the war in Ukraine,” states Ilya Spivak, head strategist at Daily FX.

However, investors shouldn’t be suckered into thinking that all is well. It’s not that anyone should want the war to continue, that should be clear. But that hope for peace in Ukraine would be an unwise investment strategy in the gold market or any other asset.

There is a long history of subterfuge and misinformation from governments when waging war. Russia is no different in this respect.

The move to pullback troops from Kyiv may be the first sign of an imminent outbreak of peace. But then again it could just as easily be a diversion tactic.

So far, the latter seems more likely.

Russia has continued its bombing campaign in Ukraine, just 24 hours after declaring the pullback from the capital city, according to Reuters.

And therein lies the problem.

“The fact that a reduction in operations is not a ceasefire was a concept too far for the street to grasp, nobody wants to miss out on selling ‘peak Ukraine,’” states a recent report from currency dealer OANDA.

In other words, don’t be fooled by the market euphoria just yet.