Russia-Ukraine conflict continues to send Gold and Silver prices soaring

MCX Gold has advanced by around 6% so far this year and in fact, all the gains have come in February itself after escalation of the geo-political risk between Russia and Ukraine as investors resumed flight to safety. In the latest development, Russia has put its nuclear deterrent on a high alert on the fourth day of the biggest assault on a European state since the WWII. The United States and its allies moved to block certain Russian banks’ access to the SWIFT international payment system, which could disrupt Russian exports of all commodities from oil and metals to grains.

Meanwhile, the PCE price index in US, the Fed’s preferred inflation gauge, rose 6.1% y-o-y in January, the fastest pace since 1982. Investors are also keeping an eye on accelerating inflation and ensuing rate hikes from the Federal Reserve. Last week, Fed governor Michelle Bowman said she would assess incoming data to decide whether a half percentage point increase at the March meeting is needed.

The outlook is bullish for the medium to long term, however, in the short run, it might stay volatile. The yellow metal is heading for the biggest monthly gain since May as the latest developments in Ukraine cast a pall over markets. Apart from its haven asset role, gold is also a hedge against inflation, which could be stoked further by the surging prices of agro, energy and metals. MCX Gold April future may rise to Rs. 51,200 per 10 gram.

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