The fragile optimism on equities amid a resilient earnings season has seen European indices edge higher on Wednesday and put downward pressure on gold, pushing the price down below $1,950 an ounce.
The small increase on stocks reflects the large number of bearish factors that are offsetting the bulk of the bullish ones. The near-flattening of the Ukrainian city of Mariupol starkly illustrates how damaging and long-lasting Russia’s invasion of Ukraine is likely to be with any hope of peace looking increasingly remote.
Live Gold Price Chart - $/g
Add in the cost of living crisis as a result of ever-rising inflation and now the International Monetary Fund’s slashing of its forecast for global growth and it is difficult to see where traders are finding the current positive drivers.
In this environment, with fear over the possible escalation of the war in Ukraine an ever-present concern, gold still retains upside potential and could easily spring back above $2,000 an ounce as it achieved last week. And while the war and negative inflationary and growth outlook are providing strong support for gold, the backdrop of central banks likely to continue raising interest rates over the course of the year will cap its upside.
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