As per a report by Emkay WealthManagementtitled ‘Navigator’, the gold prices have been rallying but may fall if the Russia-Ukraine war situation normalises. Except for the UK, the interest rates in the rest of Europe has not been hiked so far, and it is felt that it may be delayed. The aggressive stance by the US Fed is likely to cause some problem as US Dollar yields rise and the currency strengthens. The prices of commodities quoted in US Dollars is likely to gradually ease. This trend could accelerate with the war clouds subsiding in Eastern Europe if negotiations meet with some success.
Gold traded higher to US$ 2070 after the breakout of war in Eastern Europe. This was the result of some amount of flight to safety. However, with the war situation easing a bit, gold prices have come down to US$ 1923. From the range of US$1760 to US$1860, where it stayed for almost six months, the breakout to higher levels happened as inflationary expectations went up in almost all major economies.
Inflation touched 40-year highs in the US, followed by the UK and Europe. Price level pressures emerged in India too. This development kindled the demand for gold. The twin factors, inflation and war, in short, helped this pick-up in gold prices. Gold ETFs received net inflows to the tune of US$ 2 billion in February, after a pick-up in January. Both North American and European ETFs witnessed inflows. The same trend is expected to be maintained in March too.
