Ukraine faces economic uncertainty as political conditions deteriorate

WILL HORN
BUSINESS CORRESPONDENT

On top of the political crisis that has occurred in the Ukraine, the Ukranian economy has also tanked. With the Ukrainian government asking for $15 billion from the International Monetary Fund, the country is suffering from severe inflation. Ukranian Prime Minister Areseniy Yatseyuk said that the “government is ready to take politically unpopular steps” if they will help to get Ukraine the much needed bail out.

Conflicts in the Ukraine have sparked investors all over the world to turn back to the oldest assets’ gold. Even though gold has almost no risk, it is still one of the best investments because it is not linked to one country. This gives investors’ confidence because if a country’s economy collapses, gold prices will still remain steady.

The price of gold in the market as of Sunday was roughly $1,344.74, which is up 11 percent since the beginning of the year. This is a significant gain especially after a 28 percent crash in 2013. The crash was because of investors wanting to take more risk in the stock markets.

Gold prices have escalated in the past few days since the start of the conflict in the Ukraine. It seems that investors are seeking asylum from the geopolitical crisis there. Most traders prefer to hold gold over bonds or stocks in times of turmoil because it is not linked to any particular country.

As the 2013 economic crisis seemed to calm down the gold prices rose at a slower rate, most likely because investors felt more comfortable with riskier investments like stocks. Another reason gold prices started to rise at a lower rate was that some investors wanted to get out and take the short-term profit.

This happened before when the Ukrainian government almost defaulted and went bankrupt. The country has serious debt and, even if this crisis between Russia and the Ukraine does end peacefully, the price of gold will still be rising because of the large debt the Ukraine will have to pay off in the coming years.

With the Ukrainian problems far from over, the price from gold should be rising. As long as there are international crises happening, gold should be a trustworthy asset.

Contact the writer:
will.horn@scranton.edu

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