After weeks of warning that Russia was going to invade Ukraine, President Putin finally made the decision to send Russian peacekeeping troops into separatist-controlled areas of eastern Ukraine. The decision was met with widespread disapproval in the West, and while this wasn’t the full-fledged invasion that President Biden warned about, it was nonetheless a concerning escalation that could inflame tensions in Eastern Europe.
We haven’t seen what the full fallout from Putin’s decision is yet, but already markets are panicking over what has happened. It’s almost as though everyone’s biggest fear has finally become reality, and everyone fears what might happen next.
If Russia does launch a full invasion of Ukraine, the effects could be disastrous. But even its limited action so far could have a significant impact on you and your finances. Here are three ways the crisis in Ukraine could affect you.
1. Higher Energy Prices
One of the immediate impacts of Russia’s actions was the decision by Germany to suspend certification of the Nord Stream 2 pipeline. The pipeline was scheduled to double the amount of natural gas that could be piped from Russia to Germany.
The Nord Stream projects have been criticized for years, particularly because of their geopolitical importance. Current natural gas pipelines travel over land, through countries such as Belarus, Ukraine, Poland, Slovakia, and the Czech Republic. That gives those countries at least some input and influence over natural gas shipments, as well as transit fees.
If Nord Stream were to diminish the amount of natural gas flowing through the land pipelines, Russia could supply natural gas directly to Western Europe but start cutting off supplies to Eastern Europe. That makes Eastern European countries nervous about their future energy supplies.
The suspension of certification of Nord Stream 2 very likely won’t be received well by Russia. There’s a very real chance that, depending on the severity of any future Western sanctions, Russia may decide to retaliate by reducing or cutting off energy supplies to Europe. That could hit Europe pretty hard, as the continent gets approximately 38% of its natural gas, 26% of its oil, and 46% of its coal and solid fuels from Russia.
Those supplies will have to be acquired elsewhere, which could put upward pressure on natural gas and oil prices worldwide. We’re already seeing $4 gas in many areas of the country as oil reaches $100 a barrel. And natural gas prices are already more than twice as high as they were two years ago.
Continued tension over Ukraine or a flareup in Eastern Europe could send energy prices through the roof, and no household in this country would be spared. With inflation already at 40-year highs, the last thing anyone needs is gas that’s even more expensive.
2. Weaker Stock Markets
Stock markets reacted poorly to the news of Putin’s troop surge, and there’s no telling where they’ll go from here. In previous panics many investors have swept in to “buy the dip,” but that may not happen this time.
Now the confidence that people may have had that everything was still going to turn out alright has been shattered, and the reality that we could be on the precipice of World War III is starting to sink in. Stock markets have already started the year on a weak note, and there’s no guarantee that they’re going to get any better.
The longer the crisis in Ukraine goes on, the worse sanctions against Russia get, and the longer we go without some sort of final resolution, the worse the effect on stock markets could be. That doesn’t necessarily mean that this crisis will be the trigger for a stock market correction, but more likely that it will weigh on investor confidence and keep markets from regaining their previous highs.
If you’re heavily invested in stocks, this may be the kick in the pants that gets you thinking about protecting your wealth, diversifying your portfolio, and looking into alternative investments.
3. Stronger Precious Metals Market
Among those alternative investments are precious metals, which have been seeing both renewed interest and renewed growth this year as a result of the unpleasantness in Ukraine. The crisis has boosted gold to over $1,900 and has pushed silver to over $24.50 an ounce. Don’t be surprised to see those prices push higher as fears over Ukraine induce more and more investors to engage in safe haven buying.
The outlook for precious metals was already looking pretty good this year, with rising inflation already contributing to strong and steady demand. Now that we have a bona fide international crisis on our hands, and especially one that could roil international energy markets, gold and silver should see even more increased demand.
Every cloud has a silver lining, and while financial markets may end up feeling the pain from what’s going on in Ukraine, it could be a boon to precious metals markets. The more instability there is, the higher precious metals prices could rise.
If you’re interested in exploring the precious metals options available to you, you’ll be happy to know that there are numerous ones out there. Whether you just want to buy gold and silver coins to hold yourself, or protect your 401(k) or IRA retirement savings with a gold IRA or silver IRA, there’s a precious metals investment option out there for every budget and every retirement plan.
The precious metals experts at Goldco are standing by to answer your questions about gold and silver and the many ways that owning gold and silver can help safeguard your savings and protect your retirement dreams. Don’t let your hard-earned savings go up in smoke if international relations start to break down. Call Goldco today and start taking the first steps to preserving and protecting your wealth.