An attack on a military convey that killed seven Ukraine soldiers and injured eight has raised concerns that the crisis in Eastern Europe will get worse. Stock market traders reacted to the news by ploughing investments into gold bullion.
The yellow metal has enjoyed a 7.8 per cent rise this year, most of which has been generated from geopolitical turmoil over Ukraine. Before the turn of the year, gold had been predicted to average $1220 an ounce, but has been hiked over $1300 an ounce for the best part of 2014.
The strength of the global economy should have been the catalyst for gold prices to decline, and although economic data was sluggish during the weather-hit winter months, positive signs are accelerating. US retail sales is the latest figures to show significant signs of encouragement.
The latest attack by pro-Russia insurgents has been labelled as an “undeclared war” with Russia by Ukraine ministry of defence. Although militants in Donetsk and Luhansk appear to be acting independently, the UN and the US are accusing Russian Prime Minister Vladimir Putin of manipulating the course of action.
“Russia is already engaged in supporting Russian-led protesters,” Ukrainian Prime Minister Arseniy Yatsenyuk told reporters in Brussels. The West has responded by issuing tougher sanction on Russian assets including natural gas and oil.
Traders in Russia do not appear to be fazed by the risk of frozen assets on the countries industry. Stocks enjoyed gains of another 0.7 per cent this morning and the Micex index has gone up for the fifth consecutive day. The Euro on the other hand has suffered losses.
Regardless of the sanctions and escalating violence, analysts are optimistic an all-out war can be diverted. EU ministers have begun crisis talks and Putin is being pressured to persuade rebels to vacate the Eastern regions of Ukraine.
The Ukraine situation may be supporting gold prices now, but the strength of the US economy and thus the global economy will take precedence and gold prices will fall. However, whilst the Ukraine crisis rumbles on the value of precious metals will continue to rise.
The uncertainty over Ukraine leaves investors with a dilemma. Should you buy gold now or wait for the prices to fall. As we have seen in recent weeks, one critical event can change the pattern of investments and leave spikes in the charts.
With the global economy showing signs of improvement, gold prices would ordinarily fall to attractive rates, and the technical data supports the bears. The US Federal Reserve are winding down their quantitative easing program which supports equities rather than precious metals.
The savvy investor will wait for gold prices to drop, but the gamble may not pay off if geopolitical tensions in Ukraine cannot be resolved diplomatically. If violence continues and escalates into war, gold prices will climb well above the $1300 threshold and prices investors out of the market.
The smart thing to do then is edge your bets and invest in gold whilst prices are still affordable. For the latest bullion deals, head over to coininvest.com and add gold to your investment portfolio today.