Two months have passed since the Crimea referendum in which the vote swung towards joining Russia as a federal subject; their decision appeased fears for a military conflict in the heart of Europe and triggered a correction of gold prices to the level of $1,300 an ounce.
Although military action was avoided, and diplomacy and confined sanctions were chosen as preferable weapons, the geopolitical crisis has not receded, but has in fact escalated in other regions of Eastern Europe, this time with a number of civilian casualties. All analysts agree that the possibility of war or invasion in Ukraine has been averted, and it is almost inconceivable that the current crisis will lead to a full-scale military confrontation between NATO and Russia. However there are different theories about the possible economic implications of the situation.
The Ukraine crisis and demand for gold
Gold prices have been withering around the $ 1,300 an ounce area for quite some time, so a near term technical prognosis is becoming progressively harder. On the other hand, trying to foresee gold demand based on political speculation is worse than walking on a razor’s edge. Market analysis should be based on facts, not speculation, and in particular it should be based on financial facts if it is to have any credibility.
It is very easy to say that gold prices went up by 0.5% because President Putin made this or the other announcement, but it is very difficult to explain why gold prices will rise or drop during the following months because global gold demand will depend on what is going on politically in the Luhansk Oblast or any region of Moldova.
The world was taken by surprise with the initial Crimea situation, as the violent nature of events flash-backed us to entirely different periods in history. As it turned out, no Cold War was reinstated as Western nations upraise the benefits of assignation over isolation and regard the cold-shoulder policy as an extreme measure.
An Iron Curtain was not raised as European firms have close ties with Russia, and the EU economic recovery remains fragile.The West seems unwilling to challenge Russia’s energy sector as Europe’s reliance on Russian gas makes it particularly vulnerable to Russian retaliation. So far a “do nothing-simply watch and wait” policy has been adopted by the West and the energy markets show no sign of distress.
The gold market has found a remarkable stability at current levels in an effort to find higher support points and eventually break the $ 1,300 per oz. barrier.
Gold investors facing a predicament at current prices
Investors who believe that the geopolitical turmoil in the Baltic area may escalate to a military conflict are reasonably at a standby, waiting to get better prices for their gold. It is a real dilemma, as news concerning the US economy-a factor that definitely has a hard impact on gold prices- is also controversial.
In all fairness, remaining idle is the worst option, and making moderate purchases at current levels with a long term perspective is absolutely your best bet, especially if you take the brilliant offers of coininvest.com into consideration.