PRESS ROOM
Gold prices retreat after reaching close to record highs
Friday 18th March '22
Gold’s rally through February, its recent peak on 08 March, and subsequent pullback suggests that prices aren’t necessarily baking in any eventuality but responding acutely to the latest developments on the Russia-Ukraine front. Investors typically turn towards gold when geopolitics, or any other major disruption, creates risks to global economic growth. The ongoing conflict has threatened to leave a lasting fracture in supply chains which, in turn, will have a knock-on effect on growth. We think this has put central banks in a pickle. The Federal Reserve, and others, will not only have to tighten while growth may be slowing down, but tighten policy amid heightened geopolitical risks. The combination of geopolitics and reduced freedom for central banks to withdraw policy accommodation despite rising inflation is, in theory, a highly conducive environment for gold. We don’t think current prices reflect such a scenario.