Gold And Silver Prices Fall As Interest Rates Rise
It is the buying time for gold and silver investors as the prices have dipped amid a rise in the interest rates. Simultaneously, a growing optimism for the Russia-Ukraine war ceasefire is resulting in investors moving away from safe-haven assets.
The United States and United Kingdom central banks may increase the interest rates by basis points ranging between 25 and 50 amid rising inflation. Hence, gold is becoming less attractive to many investors.
The change in the interest rates is for the first time since the COVID-19 pandemic started in late 2019 or early 2020. The move of central banks is focused in handling the rising inflation.
The silver price may not fall as rapidly as gold due to its use in a couple of industries including electricity. The rush for energy independence is on the rise due to the Russian invasion of Ukraine which has led to bans on the imports of oil and gas from the country. This has resulted in a shortage of products.
Commerzbank analysts state the rising hope of a ceasefire between the two countries is leading to reduced demand for gold and silver by investors. The bond yields are on the rise and hence gold is becoming a non-interest investment. However, it is yet to be seen whether the effect is witnessed in the gold ETFs as the demand is still at a high level.
Russia invaded Ukraine on February 24 and the conflict has now entered into a second month amid a couple of failed peace talks. The Western allies have imposed several tough sanctions on the country including a ban on oil and gas imports as well as a removal of the Russian banks from the international SWIFT payment systems.
Both Russia and China have condemned the ban and this has led to a shortage of oil and gas in several European countries. The prices of food, fuel and other necessary items are on the rise and inflation is rising at a rapid speed. Analysts believe inflation may reach a double-digit figure if the war continues longer.
Meanwhile, the US and NATO have turned down the request of the Ukrainian government to fight directly against Russian forces fearing the move may lead to World War III.
The Russian forces, tanks and missiles have destroyed key cities and towns in Ukraine. Millions of citizens have been displaced and taken refuge in neighboring countries. Another peace talk is on the card with the help of Turkey and the world is optimistic about the outcome.