Amid Rising Ukraine Crisis, Eyes Turn to Gold... Looking at Previous Cases

Iraq War - Sharp Rise and Stabilization During Crimea Crisis

On the 22nd, the KOSPI and KOSDAQ indices closed lower due to concerns over armed conflict between Russia and Ukraine. Related news is being displayed on the monitor in the dealing room of Hana Bank in Euljiro, Seoul. Photo by Moon Honam munonam@

[Asia Economy Reporter Yoo Je-hoon] As interest rates rise and the Russia-Ukraine war crisis intensifies, more investors are paying attention to gold, a representative safe-haven asset. Due to growing uncertainty causing fluctuations not only in stocks and bonds but also in the virtual asset market, the price of gold, a typical safe-haven asset, is soaring.

According to the financial sector on the 23rd, the balance of gold deposit accounts at three major commercial banks handling gold banking (KB Kookmin, Shinhan, and Woori Bank) was recorded at 697.1 billion KRW as of the 18th. This is an increase of 11.9 billion KRW compared to the end of the previous month and 75.2 billion KRW compared to the same period last year.

Gold is gaining attention again because, alongside interest rate hikes, the escalating war crisis in Ukraine has led to continued weakness in the securities and virtual asset markets, while gold prices, regarded as a representative safe-haven asset, are on the rise.

In fact, as of the previous day's closing, the KOSPI index stood at 2706.79, down about 9% from the beginning of the year, and Bitcoin prices also dropped about 18% to approximately 45.28 million KRW per coin as of 8 a.m. that day. Meanwhile, gold prices are trending upward. According to Shinhan Bank, the international market price of gold was $1900.05 per troy ounce as of the previous day, up about 9% from the start of the year.

A financial sector official explained, "What the financial market fears most is not the bad news itself but the uncertainty caused by it," adding, "If Russia chooses full-scale war, NATO's involvement in some form is inevitable, and this situation is fueling the rise in gold prices."

The financial sector believes that future gold price trends may vary depending on the developments in the Ukraine situation. It is explained that the impact will depend on whether Russia, which has deployed troops under the name of 'peacekeeping forces' in the Donbas region, is considering full-scale war with Ukraine or if the conflict will remain a localized war in the Donbas area.

Looking at major cases since the 2000s, war or increased military tension has not necessarily led to long-term gold price increases. For example, during the 2014 Crimea crisis, which can be considered a prequel to the current situation, gold prices surged by 6.5% to $1324.90 per ounce in early February when the crisis was escalating, but after the Crimean Republic was annexed by Russia and civil war broke out in the Donbas region in March, gold prices declined.

Even if full-scale war occurs, if it remains a short-term conflict, rapid stabilization has been observed. In the case of the 2003 Iraq War, gold prices surged about 10% to $381.88 per ounce in February before the war due to heightened uncertainty, but after the war broke out in late March, prices fell to $326.60 in April, quickly returning to normal. This was partly because then U.S. President George Bush declared the end of the war in May, indicating the Iraq War was a short-term conflict.

Lee Sang-heon, a researcher at Hi Investment & Securities, said, "The recent rise in gold prices is largely influenced by tightening policies in addition to military tensions, which is different from the previous Crimea crisis," adding, "Overall, since these uncertainties are already priced in, unless a full-scale war occurs, it is unlikely that the sharp rise in gold prices will be prolonged."

This content was produced with the assistance of AI translation services.