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Sanctions on Russian Oil Took Investors to Look for Gold’s Safety.

In: Finance

Gold has been on the rise for almost 19 months. It fell just abou to reach the 19 month threshold. This was driven by the concerns raised around the invasion of Ukraine by the Russians, and how it is expected to spike inflation and impact negatively other economies.

As the U.S. bans imports of Russian crude, European stocks and U.S. futures climbed on Wednesday, the day after the S&P 500 tumbled to a nine-month low on worries that energy prices may extend gains. Treasury yields also rose as havens retreated, putting pressure on non-interest bearing gold.

Physical gold is still up about 10% this year as investors seek a refuge against the threat of a shock to the global economy. With inflows of about 152 tons this year, holdings in gold-backed exchange-traded funds have reached the highest since March 2021, according to the initial data. Spot gold moved back toward $2,000 an ounce, and fell as much as 2.4% in London.

The latest move by the U.S. to ban Russian oil and the U.K. to phase out Russian crude imports by year-end has stoked further fears of stagflation, where prices rise while economic growth stutters. The impact of the war in Ukraine and sanctions on Russia have reverberated across the globe, driving commodities higher during supply difficulties.

“We all saw that coming, but still, it feels like a roller-coaster drop moment. With this ban, oil is easily expected to trade at new records. By that correlation, it is not difficult to see why gold may also be trading at a new record high soon,” said Howie Lee, an economist at Oversea-Chinese Banking Corp. “The ban on Russian oil by the U.S. is causing more inflation jitters.”

Just $5 short of an all-time high reached in August 2020 Spot gold was down 2.3% at $2,004.07 an ounce by 1:18 p.m. in London. Prices touched $2,070.44 on Tuesday. On the LME (London Metal Exchange) with copper losing 1.7% to $10,048 a ton, most contracts declined in base metals. Nickel prices earlier jumped by the exchange limit in Shanghai in the wake of unprecedented moves and a trading suspension on the LME following a short squeeze.

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