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Fear and volatility pushing gold price above $1,850

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(Kitco News) - Gold prices have broken above critical resistance at $1,850, ending the week at its highest level in three months.

Gold caught a bid late Friday as tensions between the U.S. and Russia heightened. The precious metal started to rally after the White House recommended that all U.S. citizens leave Ukraine in the next 48 hours.

The news also created some significant selling pressure in equity markets, with the Dow Jones Industrial Average looking to end the session down more than 500 points or 1% on the day. Meanwhile, gold prices are up more than 1% on the day, last trading at $1,863.80 an ounce.

I’m not a big proponent of buying gold as a geopolitical safe haven only because of the track record. When tensions start to ease, gold is the first thing that gets sold. But the reason why I am paying a little more attention to this breakout is because of the market volatility that is being created. Geopolitical tensions have added fuel to the fire, but the reality is that market volatility is not going away anytime soon.

Even before the latest Ukraine news hit the wire, volatility was creating instability in equity markets, which was helping the gold market fight against rising bond yields. The gold market was seeing substantial gains, pushing above $1,815 an ounce as the 10-year bond yield rose above 2% for the first time since November 2019.

Gold is attractive because there is a lot of fear in the marketplace. Aside from the geopolitical headlines, the biggest fear among investors is how the Federal Reserve and other central banks will deal with rising inflation pressures.

Gold price jumps as U.S. warns Russia could attack Ukraine 'any day'

This week U.S. consumer prices saw an annual rise of 7.5% in January; inflation is rising at its fastest pace in 40-years. Rising prices are also impacting consumer optimism, which on Friday fell to its lowest level in 10-years, according to the latest research from the University of Michigan.

Not only are investors afraid of the growing inflation threat, but they are starting to get nervous regarding how the Fed will handle rising price pressures. Markets are seeing a 50 basis-point move in March as a sure thing and are pricing in the potential of six rate hikes.

The era of free money that has driven equities to record valuation is starting to come to an end, and it might be good to protect yourself with a little bit of gold.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.