Gold prices surged over 3% on Thursday and palladium led a rally in precious metals, as Russia's invasion of Ukraine ratcheted up fears of a war in Europe and drove investors away from riskier assets and into safe havens.

Spot gold climbed 3.4% to $1,971.54 per ounce by 1018 GMT, the highest since September 2020. U.S. gold futures jumped 2.4% to $1,956.00.

Russia launched an all-out invasion of Ukraine by land, air and sea on Thursday, confirming the worst fears of the West with the biggest attack by one state against another in Europe since World War Two.

An Inflationary Crisis

"There is obviously safe-haven demand coming into the [gold] price, but this crisis is very inflationary because it's adding upward pressure on commodities prices ... it is recessionary as well in terms of the growth perspective," Saxo Bank analyst Ole Hansen said.

Oil prices shot up and stock markets slumped on Thursday as the situation worsened.

Gold has risen over 9% in February so far as the Russia-Ukraine crisis hammered risk appetite. The metal is headed for its best monthly performance since July 2020.

Autocatalyst palladium jumped over 7% to $2,665.99 an ounce, its highest since August last year.

Palladium's rise is a natural reaction to Russia being a big supplier of the metal, Hansen said. "The only thing that potentially could counter is the risk of recession, especially in Europe and Germany, which is such a big producer of automobiles."

Russia is the world's third-largest producer of gold, while Moscow-based Nornickel is also a major producer of palladium and platinum.

Gold Could Reach $2k

"A protracted escalation could see gold rising to or above $2,000 per ounce in the short-term," UBS analyst Giovanni Staunovo said. "While the PGMs platinum and palladium are supported on metal availability concerns."

Silver surged 4.2% to $25.56 per ounce and platinum rose 2.7% to $1,121.10.

(Reporting by Bharat Govind Gautam and additional reporting by Swati Verma in Bengaluru; Editing by Anil D'Silva)