Gold prices jumped after the US and the UK banned Russian oil imports on Tuesday.
The precious metal has risen by 12% since the beginning of 2022. Russia's invasion of Ukraine has boosted demand for gold in February.
The commodity hit $1,900 last month for the first time since summer of 2021 as the conflict escalated. In March, gold surpassed $2,000, reaching the highest point since August 2020.
The precious metal remained above $2,000 on Tuesday, reaching an intraday high of $2,078 per ounce and surpassing the all-time settlement high of $2,069.40 from August 6, 2020.
However, gold has failed to beat its highest price on record. Comex futures with delivery in April closed at $2,043.30, settling below an all-time high.
The precious metal rose by $47.40 or 2.4% on March 8 on the news of a possible US and UK ban of Russian oil imports.
New sanctions against Russia have sent stocks downwards. Investors are liquidating their positions in risky assets and are buying gold as a hedge against the economic crisis.
"The combination of roaring energy prices, grain prices, base metal prices is culminated in dramatic inflationary pressures that continue to be the major underlying support behind gold moves higher," David Meger, director of metals trading at High Ridge Futures commented.
Investors are concerned about the ability of central banks to limit inflation amid geopolitical tensions. The US and UK ban on Russian oil imports have raised fears of increased inflationary pressure.
Yesterday, US president Joe Biden announced the United States would ban imports of Russian oil and natural gas. The UK joined the move, stating it would phase out Russian oil imports by the end of 2022.
Restrictions on Russian supply could throw the world's commodity market into disarray, pushing oil prices to new record highs. According to some outlooks, the commodity could even hit $300 per barrel or more in 2022.
Skyrocketing oil prices could send inflation upwards as well, pushing up demand for gold as a hedge asset.
According to an outlook by Citigroup, nominal gold prices should breach $2,125 over the next three months and trade in a higher range for the rest of 2022. Rising inflationary and geopolitical risks are likely to give support to the precious metal.
Some analysts predict gold could reach $3,000 per ounce if sanctions against Russia are expanded.
Bart Melek, head of global strategy at TD Securities, said such a price jump was quite possible. "It's turning out that $600 billion of Russia's foreign reserves are useless because its central bank has been sanctioned. The only thing that seems viable now is physical gold. The experience is similar on the individual level, as your accounts can be frozen. If they cut off your internet, you can't get your money. But no one can access physical material," Melek noted.