Judging by gold's reaction to Russia's annexation of Crimea in 2014, analysts at MKS PAMP suggested that the precious metal may move even higher this time amid the ongoing conflict between Russia and Ukraine.
In the middle of the week, the yellow metal showed impressive growth, using the new round of escalated tensions between Russia and Ukraine as a catalyst.
On Monday, Russia's Defense Ministry announced it was sending some troops away from the Ukrainian border back to their bases. However, NATO Secretary-General Jens Stoltenberg said Russia continued to maintain massive military forces on the border with Ukraine.
This may indicate that Moscow is not willing to work on a diplomatic resolution of the conflict. So, the threat of invasion is still there.
The fears that Russia could launch a military assault on Ukraine sparked panic in the stock market, thus increasing the appeal of safe haven assets.
On Tuesday, gold appreciated by 0.8%, or $15.30. At the close of the session, gold was trading at $1,871.50 per troy ounce, its highest level since June 11.
Apart from geopolitical risks, the asset gained support from a weaker US dollar and falling 10-year Treasury yields. They both declined after the FOMC minutes from the January meeting had been published yesterday.
The minutes showed that the stance of the regulator was less hawkish than expected. Last month, the Fed officials agreed that it was necessary to raise the interest rate amid intensified inflationary pressure. Yet, they added that the Fed would make a decision after analyzing price growth.
At the moment, markets are worried that the US Federal Reserve hesitates to take more aggressive measures despite already making a policy mistake.
The US central bank acted too late as it considered inflation a temporary phenomenon, thus letting prices skyrocket. Notably, the US inflation rate has hit its highest level in the past 40 years.
On the other hand, there is a risk that an aggressive rate hike may trigger a recession. So, the Fed is facing a dilemma and has to make a difficult choice now.
Both the economic downturn and raging inflation are favorable for gold. Some experts believe that gold will benefit from any scenario the Fed chooses to follow.
Growing distrust of the Fed's policy and the flare-up between Russia and Ukraine are extra favorable for gold, Nicky Shiels, an analyst at MKS PAMP, said.
The expert is sure that there is great upside potential for gold amid the threat of Russia's invasion of Ukraine. Nicky Shiels recalled that during Crimea's annexation in 2014, gold surged by $140.
Gold's recent growth on this Russia-Ukraine conflict has been around $80 so far. But since gold is considered one of the best hedges in times of military conflicts, it is likely to rise further as tensions between the two countries continue to escalate.
It is also possible that gold will appreciate even higher than 8 years ago as at the moment it is supported by growing inflation risks.