Gold jumped to an eight-month high on Thursday and was within striking distance of the key $1,900 an ounce mark after a Russian news report of mortar fire in eastern Ukraine drove investors toward safe-haven assets.
Spot gold rose 1.5% to $1,895.69 per ounce by 10:12 a.m. ET (1512 GMT), its highest level since June 11.
U.S. gold futures gained 1.3% to $1,895.50.
Dampening appetite for riskier assets, Russian-backed rebels and Ukrainian forces traded accusations on Thursday that each had fired across the ceasefire line in eastern Ukraine.
“When times really get uncertain and anxiety is running high, gold is still the safe-haven asset to go to,” said Jim Wyckoff, a senior analyst at Kitco Metals.
Meanwhile, the RIA news agency reported Russia has expelled deputy U.S. ambassador Bartle Gorman and Washington will respond to the move.
“Not only do the events on the Ukrainian border have investors seeking out safe-havens, but it (gold) also offers inflation protection at a time of surging prices and the prospect of higher oil and gas prices, if Russia does invade,” Craig Erlam, senior market analyst at OANDA, said in a note.
On Wednesday, minutes from the Federal Reserve’s January meeting revealed policymakers’ intend to begin raising interest rates to curb inflation, which would translate into higher opportunity cost of holding the non-interest-paying metal.
Investors also took stock of data showing U.S. jobless claims rose unexpectedly last week, but remained at levels associated with tightening labour market conditions.
Auto-catalyst metal palladium jumped 3.2% to $2,352.68 per ounce, after hitting a two-week high earlier in the session.
Russia is one of the world’s largest palladium-producing countries and any escalation in its conflict with Ukraine could lead to supply disruptions, analysts said.
Silver gained 0.9% at $23.75 and platinum climbed 1.5% to $1,077.30, after hitting a three-month high earlier.