(Kitco News) High levels of volatility creep into financial markets following Russia’s attack on Ukraine, with gold seeing $90 price swings and silver posting a sharp reversal as investors are digesting the new geopolitical reality.
The precious metals market posted strong gains for most of the day following Russia’s full-scale invasion of Ukraine. Gold hit a 1.5-year high at $1,976.50 and silver hit a seven-month high at $25.67.
However, both metals eventually lost ground and closed the session lower on the day as traders reassessed the situation. Comex gold futures for April were last at $1,903.80, down 0.35% on the day, and silver for March was at $24.21, down 1.40% on the day.
“The initial shock of what happened overnight with Russia and Ukraine drove all safe haven metals higher, gold and silver in particular. also increased,” Peter Mooses, senior market strategist at RJO Futures, told Kitco News. “And as the day progressed, things started to roll back. Margin calls had to be satisfied, and traders had to enter and exit their positions due to the volatility caused by the morning. there was also some profit taking.”
The bulk of the losses came after US President Joe Biden announced new sanctions against Russia, which targeted more of the country’s banks, state-owned companies and Russia’s ability to do business in other currencies. notably the dollar, the euro, the pound and the yen.
“This is a premeditated attack,” Biden told reporters Thursday. “Putin is the aggressor. Putin chose this war. And now he and his country will suffer the consequences.”
Markets were relieved to learn that US forces would not fight in Ukraine and that new sanctions had been signed so as not to harm the energy market. “Our sanctions package is specifically designed to allow energy payments to continue,” Biden said.
The president urged U.S. oil and gas companies not to exploit the Russia-Ukraine dispute to raise prices, adding that he would release additional barrels of oil if conditions warranted.
Another boost to risk sentiment came after Biden decided not to impose sanctions on Putin himself or disconnect Russia from the SWIFT international banking system.
Biden’s sanctions were widely disappointed, hurting risk sentiment, said Edward Moya, senior market analyst at OANDA.
“The price of gold fell rapidly after it became clear that it would have no catalyst to clear the $2000 level today. accelerated after President Biden unveiled the next round of sanctions, which many felt was not hard-hitting enough given last night’s Russia invasion of Ukraine,” Moya said. “The decision not to kick Russia out of the Swift banking system means that Russia and Europe will not suffer any immediate additional economic pain.”
However, precious metals investors should prepare for greater volatility as Russia’s invasion of Ukraine continues.
“The market reaction is saying the sanctions could help and we wouldn’t need the safe haven as much as we thought overnight. That’s why we’ve seen some sell-off in the metals,” he said. said Mooses. “Tomorrow we will see what Russia’s next move will be. We should expect a lot of volatility, especially heading into the weekend. There is a possible buying opportunity for anyone who wants to get back into the market and be long on gold and silver.”
It’s important to keep in mind that markets can surprise investors, especially in the post-pandemic environment. “We’ve seen over the last couple of years that the market isn’t reacting like it used to. We’ve seen with the pandemic at times when we’ve had bad news, it’s pushed stocks and other metals up and traders moved away from metals as a safe haven,” Mooses noted.
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