Futures Plummet, Gold Slated for 3rd Week of Gains as Ukraine-Russia Tensions Escalate

Any confidence of a de-escalating situation between Ukraine and Moscow came to an abrupt halt on Monday, after leaders from the two breakaway regions of Donbass called on Russian President Vladimir Putin to recognize both Donetsk and Lugansk as sovereign nations. The president is expected to make an announcement later today regarding his decision, as hostilities across the eastern Ukrainian border continue to escalate.

With an end to the conflict nowhere in sight, futures markets were sent tumbling on Monday, as the world assessed the crisis in eastern Ukraine minute-by-minute. US equity futures fell to a session low of 4301 from overnight highs, while the Euro Stoxx 600 slumped to the lowest since early October, as traders remain on edge over the emergence of any news from Ukraine and Russian leaders.

However, commodity markets registered a performance streak in response to the crisis, with gold soaring to nearly the highest in eight months, as investors pile into safe haven assets amid fears of interventions in Ukraine from Russia and the West. The precious metal is now trading just under $1,900 per ounce at the time of writing, marking the third week of consecutive gains.

Data from Refinitiv showed precious-metal mutual- and exchange-traded funds accumulate net inflows for five straight weeks, marking the longest such streak since August of 2020. As such, analysts at Citigroup have turned their near-term gold price forecast more bullish, from $1,825 per ounce to $1,950 per ounce, citing growing geopolitical hostility. However, the bank also warned that bullion prices may face uncertainty in the longer-run, particularly as the Federal Reserve is slated to increase interest rates.

“The short-term bid for gold driven by Black Sea military tensions, a spike in risky asset volatility, and inflation hedge demand will need to grapple with an increasingly hawkish Fed and higher policy rates come March,” read a research note from Citigroup, as cited by Bloomberg.

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