Gold price in euros to record high due to Russian invasion of Ukraine

The Gold price In euro terms, it rose more than 4% to €56,500 per kilo on Thursday, reaching its highest level ever. Investors were spooked by the full-scale Russian invasion of Ukraine and are therefore seeking refuge in gold. From the west and from the south, the Russian army has invaded eastern Ukraine. Several military targets have been eliminated in the process. The rapid escalation of the situation is causing turmoil in the financial markets. The Russian stock market fell by 50%, while losses on the European stock exchanges rose to 5%. Stock prices are plummeting, with the exception of companies in the oil and gas sector. On balance, they benefit from the rise in oil and gas prices.

The gold price already shot up at the beginning of this week up, after Russian President Putin recognized the independence of Donetsk and Luhansk. This was followed by a number of sanctions against individuals and banks in Russia, but they had no impact on the financial markets. They were mainly symbolic sanctions. Calm seemed to have returned for a while on Wednesday, until it became clear that the Russian army had invaded Ukraine further. From several areas in the east of the country came images of Russian tanks, warplanes and helicopters.

Gold as a safe haven

Gold is known as a safe haven in uncertain times and the precious metal once again lived up to that reputation. Gold prices had risen by almost 4.5% to around €56,700 at midday on Thursday. This broke the old record set in August 2020, when the precious metal benefited from extremely low interest rates. Yields on U.S. 10-year bonds hit an all-time low of 0.55% at the time. When interest rates started to rise again, the gold price came under pressure, but due to high inflation, the precious metal has been in an upward trend for months now. The geopolitical turmoil has now amplified this upward price movement.

The prices of other precious metals are also skyrocketing. The silver price rose to €730 per kilo and has already risen more than 7% in price this week. Silver usually follows the price of gold, but has lagged behind the price of the yellow metal in recent months. The Silver Price reached its highest level since June last year, but still has a long way to go to the old record of over €1,000 per kilo in April 2011. Silver is more of an industrial metal and therefore reacts less strongly to geopolitical and monetary developments than gold. However, it is a much smaller market, which means that prices can rise and fall much more sharply.

While precious metals are rising in price due to geopolitical turmoil, we are seeing the prices of cryptocurrencies fall. Bitcoin lost almost 9% to €31,780, while Ethereum fell by 12.69% to a price of €2,137. Over the past seven days, these two crypto coins have both lost about a fifth of their value. The cryptocurrency market seems to be more correlated with the stock market than it is with gold lately. Stock prices have also fallen sharply since the beginning of this year.

Gold price rises while Bitcoin falls (Source: Bloomberg, via Holger Schaepitz)

Palladium price skyrockets

Platinum price rose by 2.5%, reaching its highest level since May last year. Palladium shot up as much as 8%, as Russia is the largest producer of this precious metal. Nearly forty percent of the world's supply of palladium comes from Russian mines. Car manufacturers use this precious metal in catalytic converters of gasoline cars to reduce harmful emissions. Due to stricter environmental requirements, this precious metal has been in high demand worldwide in recent years. As a result, the price of palladium has risen sharply in recent years. The fear that Russia may bring less palladium to the market is driving up the price of this precious metal. A kilo of palladium already costs more than €76,000, compared to less than €25,000 five years ago.

Gold price rises to record high

Silver price to highest level in nine months

Platinum price to highest level since May last year

Palladium price also skyrockets due to geopolitical turmoil

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