Commerzbank: If This Happens, The Price of Gold Could Increase Incredibly!

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Gold rose to a nine-month high of $1,915 on Tuesday as tensions escalated in Eastern Europe after Russia sent troops into separatist regions of eastern Ukraine. At the time of writing, spot gold was trading at $1,903.6, up 0.28% on a daily basis. Commerzbank strategists expect gold to gain more as the situation in Ukraine becomes more and more worrying.

“Due to increased risk aversion, the price of gold could rise further”

The escalating Ukraine crisis supported safe-haven flows into the yellow metal as investors focused on inflationary risks and tighter monetary policies from central banks. Thanks to this, the precious metal quickly passed the $1,800 levels it had been circulating for a long time, and took a breather above $1,900. Commerzbank strategists predict that gold as a safe-haven will see greater demand, which will push prices higher:

We believe that if the Ukraine crisis escalates further, gold will see greater demand due to increased risk aversion. This means that the gold price will likely make more profits.

Commerzbank strategists assess that the precious metal has succeeded in attracting capital away from risky assets, profiting from their decline, while its rise is capped by another safe-haven dollar:

The yellow metal is gaining from the significant drop in stock markets and bond yields. Both are indicators of high risk aversion. Likewise, the strong US dollar, seen as a safe haven, is likely to prevent a sharper rise in gold prices.

As it is known, historically, yellow metal plays an important role in hedging against the uncertainty caused by economic shocks and geopolitical problems. Therefore, the price of gold generally tends to rise during these periods. For example, the price of gold increased by around 25%, performing quite well in 2020, when the pandemic led to a sharp decline in stocks and commodity prices.

However, as we reported as Somagnnews, the gold price declined by 3.6% in 2021 as the global economic conditions improved as the pandemic receded and the liquidity pumped by the central banks was directed to the stock and crypto markets. Now, the precious metal is trying to navigate between rising geopolitical tensions and rising interest rates to combat inflation.