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Why did gold drop hard though the Russia-Ukraine crisis existed?

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Its standard theory is that the gold price will rise as a safe-haven asset in any geopolitical crisis.

But yesterday, the world witnessed a different picture I mentioned in my last article, and gold may drop because of Russian reserves and profit-taking zone. And my prediction became true. After rising 630 pips, gold dropped more than 900 pips.

There may have been two reasons that gold dropped yesterday.
Profit-taking purposes
Sanction against Russia

If the USA and their allies give brutal sanctions against Russia, Russia will have only two alternatives
Using gold to protect their economy
Using cryptocurrencies
Russia minimized its USD reserve from 40% to 13% before attacking Ukraine. So, Russia also knew they would have to face sanctions if they attacked Ukraine. So, Russia wisely managed it.

To protect Russia from sanctions, they may use both gold and cryptocurrencies. They may use cryptocurrencies for general international transactions that may hike the crypto prices.

And they will use the gold reserve to protect their economy as a hedge against inflation. So, if Russia uses a gold reserve, won't the gold price rise? No, instead, it will drop. If the gold price is high, they will get more cash from other countries. So, the USA won't let it be, and commodities prices will be high like oil and gas.

If the commodities prices go high, the sanction won't work against Russia because the European countries depend on Russian oil and gas. Instead, European countries will have to pay more for oil and gas prices. Europen needs Russian gas and oil rather than Russia to sell oil and gas to European countries.

So, if NATO and its allies only sanction gold will not rise; instead, it has big chances to drop.

When can gold rise?

If NATO and its allies also announce or start a war against Russia, there is no doubt that gold price will touch the sky. Start a war against Russia. The situation has not been started yet. It may take some more days.

NATO and its allies are punishing Russia by just putting only sanctions. Sanctions may hurt the Russian economy, not the world economy. The gold price won't go up much only by sanctions. It needs war, not only sanction to go upside.

註釋

We have updated our gold chart and analysis for the next week. Let's check it out.