Posted 30th March 2022

Gold Benefits From Dip in Equities But Further Out Bearish Headwinds Are Circling

gold news feature march 30

A slight dip on equities markets has been met with a small corresponding gain for gold.

Signs that the peace talks between Russia and Ukraine are making progress has been a driver for the recent partial recovery for equities but the situation remains very fragile with today’s small pullback a sign that investors remain unwilling to expose themselves fully to risk assets and continue to seek the succour of haven assets such as gold.

kinesis exchange kau chart gold
Gold ($/g) chart – 15 minutes – from Kinesis Exchange

While the war in Ukraine is undoubtedly the key short-term market driver, a point will soon be reached when investors may feel the bearish impact of the conflict has been fully priced in, particularly as long as talks over a peaceful resolution continue.

As a result, the focus will switch back to the macroeconomic scenario in which the cost of living is rising at the fastest level in decades for many countries.

Already the US and UK central banks have made their first moves in hiking interest rates to try and bring inflation under control and it is surely only a matter of time until the European Central Bank follows suit.

So while gold has benefited from the rush to haven assets at the start of Russia’s invasion of Ukraine, any unwinding of those fear trades coupled with central banks hiking rates is likely to see gold fall out of favour. 

So while for now, gold looks well set to trade in a range well above $1,900 an ounce, further out the support at this key threshold of $1,900 may disappear.

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