By Barani Krishnan

Gold is back at Investing.com as an asset investors can turn to when they are facing economic or political difficulties.

Six-weeks ago, the price of this shiny metal was just over $2,000 an ounce. Inflation and recession indicators combined with fears about the looming Russian invasion in Ukraine triggered alarm bells to ring again across the markets.

Front-month on New York’s Comex settled up $11.50, or 1.2%, at $1,986.40 an ounce. June gold rose 1.7% last week, adding to the previous week’s 1.2% gain.

Monday’s spike in gold came as the yield on the U.S. Treasury’s benchmark peaked at 2.884%, a level unseen since December 2018, when it stood at 3.050%.
​​
On Mar. 11, gold was worth more than $2,000 per ounce for the last time. 11. This was a fortnight later than the beginning of the conflict in Ukraine. It heightened geopolitical risk on markets. Gold had been volatile since then, falling to 1,888.30 at Comex on March 29, after which it was volatile again.

Interestingly though, Monday’s run-up came as the broke above 100 the first time since the COVID-19 outbreak, with its last high above that level registered in May 2020. They move in opposite directions, so it was impossible to tell if the negative correlation between them had snapped.

“There’s a degree of both economic and political concerns in today’s gold rally as the geopolitical implications from Ukraine can escalate out of nowhere,” said Phillip Streible, precious metals strategist at Blue Line Futures in Chicago.

“But I think inflation is the bigger factor over concerns that an aggressive Fed response could tip the US economy into recession. It is also not true that the relationship of the inverted dollar to gold does not exist. What’s more important is how worried investors are about things, and all focus now is whether we will avoid a recession.”

Inflation pressure is unrelenting, forcing Fed policymakers (or Federal Reserve) to accelerate the pace at which interest rates are raised in over 40 years, so that they can keep up with price growth.

After slashing rates to nearly zero at the height of the coronavirus outbreak, the Fed’s policy-making Federal Open Market Committee, or FOMC, approved the first pandemic-era rate hike on Mar. 16 – Rates were raised by 25 basis points or one quarter of a point

Since then, many FOMC members concluded that the increase was too timid to stop inflation from rising at an alarming rate since 1980s. They may need more aggressive 50-basis point increases over the next several meetings that begin on May 5 and 5.

The Fed’s typical target for inflation is just 2% a year — a level it considers “neutral”. To get to this, the central bank envisages that it will need six more rate hikes this year — one every monthly FOMC meeting from now.

Investors are concerned that recession will result. Two consecutive quarters with negative growth were the last time that the U.S. experienced a recession. That was in the period between March 2019 and September 2020.