(Bloomberg) — Gold advanced, with investors remaining on edge as they assessed the impact of Russia’s invasion of Ukraine and Western sanctions, against the imminent monetary policy tightening in the U.S.

Bullion fell a day earlier after surging to the highest in more than 17 months as traders digested weaker-than-expected sanctions on Russia following the country’s attack on its neighbor. Gold’s rally could have a lot further to go if a resulting commodity price spike leads to concerns of a material slowdown in growth in developed markets, according to Goldman Sachs Group Inc (NYSE:).

President Joe Biden imposed stiff penalties on Russia, whose forces have pushed closer to Ukraine’s capital, Kyiv, in one of Europe’s worst security crises since World War II. While this includes sanctions against five Russian banks that could hinder access to foreign currency but doesn’t bar Russia from Swift international payments, it does include action against the Russian government. The Russian crude oil supplies were not affected.

Federal Reserve officials indicated that they will continue to increase interest rates. They stressed the necessity to face the highest U.S. inflation for 40 years, despite the uncertainty created by the Russia-Ukraine war. The impact of higher interest rates on gold that is not subject to inflation could be significant.

“In the near term, the safe-haven bid amid an equity selloff coupled with lower real yields has been the overriding factor and risk-off flows will continue to dominate” gold, RBC Capital Markets strategists led by Christopher Louney, said in a report dated Feb. 24.

At 9:30 AM in Singapore, the price of an ounce rose 0.4% to $1910.72 The prices jumped to $1974.34 Thursday. This is the highest price since September 2020. Prices ended 0.3% lower on Wednesday. The Bloomberg Dollar Spot Index had not changed. 

Platinum and silver both moved up. After big swings during the last session, palladium moved higher due to concerns about possible supply disruptions. Russia accounts for around 40% of all global production.

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