Kinesis Macroeconomic Analysis
Two areas, one economic and one geopolitical, dominate investors’ attention today, with their focus split between Russia’s potential invasion of Ukraine and the Federal Reserve’s latest decision on interest rates.
The US President, Joe Biden, has waded into the Ukrainian situation by threatening to impose personal sanctions on Russia’s President, Vladimir Putin. It is still hoped that this will remain as sabre-rattling by Russia met by strong rhetoric, rather than anything more substantial from Western powers.
That said, there remain very real concerns that Russia will once again invade Ukraine, with any number of possible consequences resulting from that.
Despite this concerning situation, the fear seems to have been priced, to some extent, with equities gaining so far today after days of losses. However, it would only take the slightest strengthening of rhetoric by Russia to reverse this positive sentiment.
With one eye on Ukraine throughout the day, the focus will train in on the Fed, to see if the central bank feels now is the time to raise interest rates. Although there is little doubt that rate hikes will happen this year, market expectation is that the Fed will keep the rate at 0.25% for another month yet.
As such, any hike would spark markets into action and likely see the stocks most at threat from rising interest rates. The tech sector would be further punished, having already suffered substantial losses so far this year.
Kinesis Gold Price Analysis
At first glance, it could be easy to conclude that gold has failed to react to the rise in fear on markets and the corresponding drops on equities; the price is tracking steadily higher rather than demonstrating any sharp spikes.
However, in the context of falling markets with most asset classes losing money in recent days, even standing still is helpful for an investor’s portfolio. Gold is still performing its role as a safe haven, it seems.
The lack of a more sustained breakout can be attributed to two factors: the likelihood of rising interest rates punishing gold for its lack of yield, and the psychologically important level of $1,850 an ounce providing substantial resistance to gold’s ability to climb much higher.
Gold’s direction from here will be strongly influenced by the Federal Reserve’s decision on interest rates later today. If the rate remains unchanged as is forecast, then there may be more room for gold to gain, but an unexpectedly early hike would see gold drop.
Kinesis Silver Price Analysis
Silver is showing very little correlation with gold currently with the metal tracking lower over recent days in contrast to gold’s steady gains. After last week’s stellar performance, a period of consolidation was perhaps to be expected with silver’s greater industrial exposure also a factor in its recent downward trend as markets fell.
It will be important for silver to hold above $24 an ounce if those hard-won gains of last week are to develop into the metal’s new threshold, otherwise, it risks falling quickly back to $23 once again.
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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.
