Gold and Silver Post-Ukraine: What Awaits The Precious Metals After The War?

Those seeking refuge in the gold and silver markets will continue betting on these assets until the uncertainty caused by the war in Ukraine dissipates. With investors fleeing to gold’s well-marketed safety this is what some experts say would happen if the Ukraine dust settles.

Although in recent days the price of gold futures has fallen —given the interest rate hike announced by the Federal Reserve— the truth is that the rise of the precious metal in recent months has been striking.

A Decline Is On The Cards

According to the Swiss Bank —Schweizerische Nationalbank SNBN— the price of gold —and that of silver— should fall in the medium and long term.

In a commentary, analyst Carsten Menke of Julius Baer Group said,  “Although inflation rates will remain high in the short term, which led the U.S. Federal Reserve to raise interest rates, we project a significant decline in the medium and long term, mainly due to the drop in the prices of the energy.”

In his view, price pressure is showing some early signs of peaking, so the demand for safe-haven assets will not remain as high for much longer. As he points out, gold is a very expensive insurance at current levels.

A Break

As reported by Reuters, gold prices rose more than 1% on Thursday, a day after Federal Reserve Chairman Jerome Powell allayed investor fears that the Central Bank could pursue highly aggressive interest rate hikes.

Ned Naylor-Leyland, manager of Jupiter AM, has warned that in the short term it is very likely that there will be “a break in the price of gold that will gain momentum.”

This has not yet happened “because the tightening monetary policies continue to dominate the mood of the market", but he believes that “the trigger may be that inflation rises above forecasts or that the market accepts that seven rate hikes in the U.S. are too many.”

“Gold arouses interest because there is concern about future purchasing power,” he explains Naylor-Leyland, and adds that “demand for physical gold is increasing because people want to hold physical gold as a hedge and central banks are increasingly buying more.”

Silver Market

Reuters reported that Spot silver had fallen by 0.1% to $22.60 per ounce —while platinum firmed 3% to $962.93, and palladium jumped 2.1% to $2,262.84.

So, Silver, according to Naylor-Leyland, is a tenth of the gold market, but its price is strongly correlated with that of gold.

“I think that when the price of gold breaks out, we will see a substantial increase in market share and that silver will also stand out,” he says.

In fact, he thinks that the silver rally will be "spectacular" because, unlike what happens with gold, while all the yellow metal that has been mined is available on the market, silver is not, since the industry consumes it and investors buy it in small quantities.

Following Gold

Naylor-Leyland concludes by stating that, although the silver market is generally more volatile than the gold market, in a broad sense, where gold goes, silver follows.

May started and silver has been in a three-week downtrend and seeing some continuation selling for the eighth straight session.

There was a negative movement during the month’s first ten days, dragging spot prices back to the $22.00 zone —or a nearly three-month low at the start of the session.

As the war in Ukraine rages on, both metals will be the subject of much scrutiny by experts and investors alike, who undoubtedly have seen it return to the fore amid the volatility of the markets.