Kinesis Macroeconomic Analysis
This week’s positive sentiment on the markets extended into a third day, with indices across the world showing gains. After a punishing January which saw significant drops, investors are viewing this point as a good time to buy stocks that now look much better value.
A main driver behind January’s declines was the expected change in course by central banks on their monetary policy, with a series of interest rates expected imminently, with growth stocks penalised as a result. However, while the Federal Reserve is almost certain to raise rates in March, comments by Fed officials earlier in the week painted a much more uncertain picture about how many more would be required later in the year.
With the hawkish tilt perhaps not as sharp as initially feared, stock markets have been able to recover lost ground, particularly after Alphabet beat estimates in its latest results, reminding investors that the tech sector is far from a busted flush.
Tomorrow brings the Bank of England’s latest decision on its interest rate, with the market now certain that a second successive hike will be announced, increasing the level to 0.5%. As a result, any significant market reaction will only happen if the BofE keeps the rate unchanged at 0.25% or surprises everyone with an increase greater than the expected 25 basis points.
Kinesis Gold Price Analysis
Gold is struggling to break through resistance at the psychologically important level of $1,800 an ounce with the metal looking to have found its new range, almost $50 below where it was just a week ago.
The “push me, pull me” contrasting factors remain in place with tensions over Ukraine showing no signs of dissipating, with Russia’s President, Vladimir Putin, accusing the US of trying to lure his country into war, while Poland has said it will send troops in support of Ukraine in the event of this stern rhetoric breaking out into actual conflict.
But while this concerning geopolitical issue should be supportive for gold, this is more than offset by the outlook over a series of interest hikes expected by central banks over the course of this year, with tomorrow set to provide confirmation of the Bank of England’s second successive rate rise.
With both these factors effectively priced in, gold will need a fresh geopolitical or macroeconomic stimulus to shake it out of its present drift just below $1,800.
Kinesis Silver Price Analysis
The gold and silver price curves are showing a neat correlation once again, with last week’s sharp drops for both precious metals now followed by a much weaker attempt to climb back.
For gold, that sees it climbing up to try and break through the key level of $1,800 an ounce, for silver, the level of similar importance, $23 an ounce remains some way off, as it trades around $22.70 an ounce. However, given silver’s more volatile nature, the nudge needed to regain that ground is much lighter than for gold.
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Rupert is a Market Analyst for Kinesis Money, responsible for updating the community with insights and analysis on the gold and silver markets. He brings with him a breadth of experience in writing about energy and commodities having worked as an oil markets reporter and then precious metals reporter during the seven years he worked at Bloomberg News.
As well as market analysis, Rupert writes longer-form thought leadership pieces on topics ranging from carbon markets, the growth of renewable energy and the challenges of avoiding greenwash while investing sustainably.
