With the U.S. Federal Reserve ready to institute rate hikes, gold should be retreating, but it’s caught in a push-pull dynamic as Russia’s invasion of Ukraine continues to play out.
This is adding another layer of uncertainty on top of inflation. In the meantime, investors are scrambling towards safe haven assets like gold as the major stock market indexes continue to fluctuate up and down amid heavy volatility.
In essence, gold is doing what it’s always been doing — acting as a cushion in times of market uncertainty.
“Gold is playing its age-old role as a safe haven in times of wars and crises, and people all over the world are piling in,” a Bloomberg article notes.
“Russia’s invasion of Ukraine has sent the price of everything from oil and gas to wheat and metals skyrocketing, sparking inflation fears and threatening global growth,” the article adds further. “That’s driving retail investors everywhere from Vienna and Singapore to New York to the safety of gold, which spiked to $2,070.44 an ounce, close to the record reached during the pandemic.”
An Alternate to Gold Bullishness
Investors looking to play on gold’s bullishness that fall outside of the realm of typical exposure via more tangible gold investments can look to futures. This is available via exchange traded funds (ETFs) like the Credit Suisse X-Links Gold Shares Covered Call ETN (GLDI).
The fund’s index measures the return of a covered call strategy on the shares of the SPDR® Gold Trust (the GLD Shares) by reflecting changes in the price of the GLD Shares and the notional option premiums received from the sale of monthly call options on the GLD Shares less notional trading costs incurred in connection with the covered call strategy.
As the world remains fixated on the Russia-Ukraine conflict, it will weigh heavily on gold. The violence is certainly taking away the attention from future rate hikes, at least for the moment.
“Typically, gold and other assets would be keenly focused on a Fed rate decision, but the FOMC event may take a backseat to the ongoing and rapidly changing situation in Ukraine,” wrote DailyFX analyst Thomas Westwater.
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