Growing global economic uncertainty and the escalating war in Ukraine continue to stir up financial markets with safe-haven demand, pushing the price of gold to new intraday and weekly highs.
According to Chris Williamson, chief business economist at IHS Markit, sentiment among U.S. equity investors turned grim in March as the deepening Ukraine crisis exacerbates already existing headwinds. Geopolitics is putting more pressure on the market than ever in a year and a half of research history.
While gold is attracting new investor interest, it has lagged behind other sectors, IHS Markit said. And investors are most optimistic about the energy sector as U.S. gasoline prices hit record highs. Meanwhile, crude oil prices are at their highest level since 2008.
By comparison, gold prices have risen 8.7% since the start of the conflict in Eastern Europe. On Tuesday afternoon, gold fell from session highs, with April gold last trading at $2,038 an ounce, up 2% on the day.
According to Williamson, as the intensity of the conflict in Ukraine increased, sectoral preferences changed dramatically. This is most noticeable with a sharp shift in preference towards energy and utility stocks, but not towards finance. Because investors fear the consequences of this conflict.
Analysts say all of this market turmoil will continue to support safe-haven assets such as gold. Some analysts warn that sentiment could change if tensions between Russia and Ukraine begin to ease. However, others believe that inflationary pressures will remain a significant drag on global economic activity even if the conflict ends.
