Gold Heading for $2,000 as War Theme Escalates

Gold prices were $20 lower on Thursday after the more substantial GDP number from the US.

However, the trend is still firmly higher, and the big news this week was an escalation of the war theme in Ukraine.

Gold – Daily Chart

Gold - Daily Chart

Gold had wrong-footed many investors all year as it fell with high inflation and then turned when the Fed decided to pivot with inflation under control.

The price of gold rallied to $1,925 and is taking a minor pullback, but the trend is higher, and a $2,000 test is likely for the precious metal.

Oil prices were lower on Tuesday after US inventories showed a rise of 3.4 million barrels. According to the API, US crude inventories rose by 3.37M barrels during the week ended January 20. The API reported back-to-back increases of 7.615M and 14.865M barrels in the previous two weeks.

The German Federal Foreign Minister said this week: “We are at war with Russia.”

That is an escalation of the passive support given to Ukraine over the last year. Russia is aware that they are up against Nato. Supplying battle tanks to Ukraine will “raise the geopolitical temperature,” military experts have warned.

US officials announced they would supply 31 M1 Abrams battle tanks to Ukraine following Germany’s decision to provide 14 Leopard 2 tanks. It is claimed to be the “best battle tank in the world.” The approval also allowed the export of Leopards by other Nato countries, including Poland.

Russia has since described the move as a “blatant provocation,” and recently, Russian President, Vladimir Putin, has warned of the possibility of nuclear retaliation for Western interference in the conflict.

A new report from the IMF and UC Berkeley said: “Central bank gold holdings have risen since the Global Financial Crisis (of 2008-9). Central banks have been stockpiling bullion over the past 15 years, more than making up for the net sales of the previous decade. Central banks worldwide bought more gold in the third quarter of 2022 than in any other quarter in 55 years.”

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