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Gold prices spike amid Russian invasion of Ukraine

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Prices of gold have reportedly surged to the highest level in more than a year in the hours after the Russian invasion of Ukraine on 24 February 2022, which the National Association of Jewellers (NAJ) said benefits from its appeal as a “safe haven” to investors.

Bullion prices also rose in February due to a combination of inflation linked to rising oil markets, falling stock markets, and the “biggest attack on a European state since World War Two”.

As the Russian invasion of Ukraine pressed on into its seventh day, gold remained above $1,900 (£1420.39) per ounce and was down 0.7% to $1,929.12 (£1442.16) per ounce in late trading on 2 March. 

The yellow metal had reportedly reached a peak of $1,973.96 (£1475.68), its highest since September 2020, having jumped as much as 3% soon after the attack. The NAJ said some analysts believe gold prices can go higher in the coming weeks depending on how events unfold in Ukraine.

Additionally, a further challenge posed to UK jewellers looking to source costlier gold is the softness in the pound against the U.S. dollar in which gold is denominated, making gold more expensive in sterling terms.

Palladium has also rallied amid concerns over supply shortfalls from supplier Russia due to the invasion. The NAJ said the increase in prices of palladium to more than a third above gold prices may “erode” palladium’s application as a jewellery metal, notably in men’s wedding rings.

Palladium, used by car makers in catalytic converters, rose 2.7% to $2,649.03 (£1980.35) on 2 March, having hit its highest level since July at $2,722.79 (£2035.49) on 1 March.

Dinesh Parekh, CEO of Birmingham-based jewellery and diamonds supplier Just Diamonds, said: “The surge in the gold price and inflation may lead some jewellers, who are not hedged, to be forced to pass on rising prices to their customers, as they see margins fall.

“Another risk for some jewellers is that if they source more supplies now, they may face losses if the gold price falls sharply back later. The weakness in the pound is also hitting hard.”

Lawrie Williams, precious metals commentator with bullion dealer Sharps Pixley, added: “If Russian palladium is removed from the market it will likely swing back into a severe palladium supply deficit situation again and we are already seeing initial signs of this with some very sharp price increases for the metal since Russia’s Ukraine invasion commenced.”

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