After Russia’s invasion of Ukraine, investors rushed to gold, the world’s oldest safe-haven asset, pushing its price to a new record. Why did this happen? Here’s what you need to know. 

Investor Gold Demand is Booming Right Now: Here's Why 

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That’s why, as soon as the news of Russia’s invasion of Ukraine erupted, savers and 

, confirming its age-old role once again.

Growing investor interest, in turn, pushed 

Why the current geopolitical crisis is making investors buy gold and precious metals.

 driving investors' demand for gold right now.

Investors' rush to the safe haven of gold represented in a picture of cartoon people running up the blue and white arrows

Savers and investors are rushing into gold, dealers say

Since the start of the war in Ukraine, many gold dealers around the world have seen their 

“It’s the ultimate backup plan to have the metal within reach. Everyone and their mum is looking at precious metals now,” 

Stephen Flood, the CEO of physical bullion brokerage Goldcore said.

Other gold resellers, including GOLD AVENUE, saw their sales doubling their usual level. 

“Since the crisis in Ukraine started, we’ve seen our orders booming. A 

 Alessandro Soldati, GOLD AVENUE CEO, said.

This growing investor demand comes after 

an already strong year for physical gold buying

. According to the World Gold Council, demand for bars and coins reached 1,124 tons in 2021, the highest in almost a decade.

a table from the World Gold Council showing physical investment gold demand between 2010 and 2021

“Geopolitical crises have always had the potential of driving investment out of risk-on assets like stocks and crypto into safe havens such as precious metals,” 

So what are the strongest factors that push investors to buy gold today? Let’s look at each of them in detail. 

What factors drive investor gold demand right now? 

Today, geopolitical tensions, the desire to hold gold as a hedge against inflation, and, to a certain degree, actions from the Fed, all help drive investor demand for the precious metal.

 such as stocks and cryptocurrencies have 

As you probably already know, investors moving their capital in or out of gold can move the gold price and create momentum in the market.

People protesting against Russia’s war in Ukraine

That’s exactly what happened when the war in Ukraine erupted: investors 

rushed into gold and moved its price close to its all-time high

, as they were looking for safe-haven assets in the face of the war in Ukraine.

“Investors are making a beeline for it because it is considered a safe store of value during times of geopolitical uncertainty and rising inflation,”

 said Richard Flax, chief investment officer at digital wealth manager Moneyfarm.

To put it differently, investors are worried about geopolitical instability, as it can deal 

 and create volatility in the stock market. That’s why so many investors prefer to move their money out of riskier assets such as stocks and digital currencies and convert them into gold and precious metals instead.

usually tends to go up in times of rising geopolitical tensions

And also because many also see it as a good opportunity to buy gold and then cash in if the price keeps rising (FYI, 

High inflation in the U.S. and Eurozone represented in a picture of a cartoon man sitting on a red floating in the sky

Inflation has been all over the news for more than a year now

 and has definitely been one of the major factors driving investors' interest in gold and precious metals, which are considered a traditional hedge against rising consumer prices.

To make matters worse, analysts warn that a drawn-out conflict in Ukraine

 will only increase inflation pressure for energy 

So, for the moment, it looks like inflation will remain among the key factors pushing investors to add gold to their portfolios. 

Driver #3: Interest rate hikes by the Fed

To curb runaway inflation, the U.S. Federal Reserve has started increasing interest rates, for the first time since 2018.

at odds about how this could affect the gold price

 and investors' demand for the precious metal.

Fed’s decision to increase interest rates to stop inflation represented in a picture of a cartoon man nailing down a red percent sign

Some argue interest rate hikes will blunt gold’s safe-haven appeal: 

“The United States real rates should turn positive by the end of 2022 and see gold’s Goldilocks moment passing,”

 said Societe Generale analyst Florent Pele.

Others, including Nicky Shiels, Head of Metals Strategy at MKS PAMP GROUP, say that gold will be able to 

 the Fed’s interest rate hikes thanks to “stickier” (read “persisting”) inflation. 

“The firepower to combat this [inflation] are 'token' incremental 25 hikes which gold can easily tolerate. Put another way, prices averaged $1,804 under the “transitory” regime, and are currently averaging $1,856 under stickier inflation,”

This basically means that the gold price 

has a potential to grow despite the Fed’s interest rate hikes

, which boosts the metal’s safe-haven appeal, thus making it even more attractive for investors. 

, pushing up commodity prices and making investors seek the protection of assets such as gold and precious metals. This created a boom for bullion dealers, many of whom doubled or even tripled their usual sales levels.

These are the strongest drivers that make investors buy gold today: 

in times of war, the fear factor often pushes investors to move their capital out of riskier assets like stocks and crypto and buy gold as a long-term safe-haven investment.

inflation remains a big issue for all of us. And the armed conflict in Ukraine will almost certainly make the inflationary situation even worse by triggering higher energy and food prices.

market analysts are at odds on this one. While one group says rate hikes will blunt gold’s safe-haven appeal, others think the gold price could easily “tolerate” higher rates simply because inflation is really high. 

Since all these events have the potential to upset global economies and markets, we will keep our finger on the pulse to see how they can affect your investments and precious metal savings.

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A Shift in Gold Demand Trends

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