Kinesis Macroeconomic Analysis
After a punishing month for equity traders and investors, January looks set to sign off on a positive note with global indices and commodities a sea of green. The macroeconomic outlook hasn’t changed with tensions remaining high in Ukraine and central banks still set to raise interest rates. A decision from the Bank of England will arrive later this week, so how long this positive sentiment will last, is open to question.
The UN Security Council will meet later today to discuss Russia’s building up of its troops on the Ukrainian border, with more soldiers amassed over the weekend. As the threat of a Russian invasion of Ukraine shows no sign of abating, both the US and the UK are working out what sanctions they can impose on Russian interests.
Given Russia’s vast oil and gas reserves and its importance to global energy markets, those two commodities have surged in price throughout this month, with the energy companies one of the few sectors to have enjoyed a rise in their share price in January.
So far, the standoff over Ukraine has been a show of strength by Russia met by stern rhetoric from Western counterparts, but if those troops were to cross the border, the geopolitical fallout would spook markets and spark a fresh plunge in prices.
The Bank of England will be the other main focus of the week, with Thursday’s meeting expected to result in a second rate rise, this time up to 0.5%. With the country’s inflation rate running at the highest in almost 30 years, the markets are viewing it as near-certain that the bank will be forced into another rise, with further hikes expected throughout the year.
Kinesis Gold Price Analysis
Gold is following the flock so far on Monday with the price on the rise, pushing up to around $1,790 an ounce.
The precious metal suffered a sharp reversal in fortunes last week, going from challenging $1,850 an ounce to sinking below the psychologically important threshold of $1,800.
The two main drivers of the market this week are likely to have a contrasting impact on gold. Any sign of further escalation in tensions over Ukraine is likely to be supportive for gold as investors seek out haven assets in a flight to safety.
While the Bank of England’s likely rate hike would be detrimental for gold, it would be further confirmation that global interest rates are on the rise, making the non-yield bearing asset of gold less attractive.
Kinesis Silver Price Analysis
Silver, like gold, has fallen out of favour with the metal now trading comfortably below $23 an ounce, after trading well above $24 an ounce a matter of days ago when it briefly surfed the wave of investor interest.
For now, silver’s movements have fallen back into line with gold so its next move is likely to follow its golden brother on what is set to be a volatile week on markets.
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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.