Posted 9th febrero 2022

Strong Earnings Make for Optimistic Mood on Markets Ahead of Key US Inflation Data

gold silver market analysis

Kinesis Macroeconomic Analysis

The markets are in an optimistic mood this Wednesday with indices across the world showing significant gains as a number of large companies, such as GSK, reported positive results with a bevvy of other companies following today and tomorrow as we hit peak Q4 earnings season. 

How long this optimism lasts will largely depend on tomorrow’s inflation data out of the US, which is forecast to show prices rising in January by 7% from a year earlier.

The Federal Reserve has recently become much more explicit about the need for interest rate hikes, with a rise next month almost guaranteed. Another inflation print in the 7% territory, or higher, would increase the likelihood of the pace of further hikes being accelerated, and bring the buoyant trading mood to an abrupt halt.

Escalating tensions over Ukraine remain the other large cloud threatening to cover over today’s sunny disposition, with French President Emmanuel Macron’s intervention earlier in the week looking to have done little to appease the threat of increased Russian aggression. 

As long as the situation remains a stand-off with both sides postulating with stern rhetoric, any market reaction will be limited. However, the first sign of Russian troops crossing the border and the plunge on markets will likely be very steep with the current optimism still very fragile.

Kinesis Gold Price Analysis

The gold price is reflecting the fragile optimism on markets, with the price continuing to climb steadily upwards despite today’s sea of green on equities.

Gold looks to have firmly climbed above $1,800 an ounce with this psychologically important level now a first support level rather than the resistance level it was a few days ago. 

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Gold ($/g) Chart – 15 minutes – from Kinesis Exchange

How much further gold can climb will largely depend on the Federal Reserve’s outlook on interest rate rises. If tomorrow’s US inflation print increases concern over rising prices, then the markets will likely increase the number of interest rate hikes they are forecasting for the year, bringing the non-yield bearing gold under pressure.

On the flip side, with the majority of investors now expecting a series of increases this year, any sign that fewer may be required could see gold extend its current bullish run further still.

Kinesis Silver Price Analysis

After being pulled up in track with gold in recent days, silver has fallen out of sync with its precious metal peer and is now drifting firmly sideways at around $23.40 an ounce.

After a volatile few weeks in which the metal surged up to $24.79 an ounce before plunging below $22.50 a matter of days later, this current level better represents silver’s value in today’s macroeconomic environment.

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