How the pandemic and war sent the price of gold and precious metals soaring

The geopolitical tensions between Russia and Ukraine, which ended in a full-fledged conflict, caused several consequences, in social and economic terms. The invasion has led to price increases in many sectors, with commodity prices at the top, going to mutate global patterns of trade, production and consumption. The current scenario has fostered the advent of a profound stagflation phase, a situation in which rising inflation is linked to low economic growth, going to decrease the purchasing power of consumers. It is precisely the latter, who suffer most from this continuous price fluctuation, which is responsible for a deep crisis in the national economy. The subsequent rise in food and energy prices is taking a strong human and economic toll, going to undermine the already growing inflationary pressures around the world.

So, as seen, the consequences of the war are concentrated, first and foremost, on those who were already weak.

Price increases are affecting several sectors, crumbling the margins of many businesses, bent by current conditions and an inability to meet major expenses. Most businesses are still suffering from the pandemic wave, and forecasts for the current year presented a strong basis for economic recovery.

The continued escalation of the war also led to a rise in the prices of precious metals, especially gold, safe haven asset par excellence. The values reached, in the preliminary stages of the conflict, far exceeded the $2,000/ounce threshold. At this time, the situation, as far as gold is concerned, has returned to stable levels, but further spikes cannot be ruled out, given the strong volatility of the current market. The resulting inflationary pressures also lead to instability for precious metals, which are normally subject to slight variations throughout the day and reflect the precariousness of the present situation. Nevertheless, they prove to be safe havens for both short-term and long-term investments. Generally, gold is identified as a geopolitical hedging index. Following the current tensions, this status has been largely confirmed, underscoring its role as an accelerating factor in financial markets.


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