Markets Take the Chance to Pause for Breath and Assess Macroeconomic Outlook

Kinesis Macroeconomic Analysis

A new trading week has started without a clear direction with global indices showing both small gains and small losses. After large losses in January were followed by a more positive week to kick off February, today feels like an opportunity for traders and investors to pause for breath and fully assess the macroeconomic picture, with no significant data releases expected today. 

The likely drivers to shake markets out of their brief rest are the same factors that have driven the direction of trading so far this year: Ukraine and the hawkish pivot by central banks that will see a series of interest rate rises over the course of the year.

On the Ukrainian front, French President Emmanuel Macron is the latest Western leader to attempt to de-escalate Russian aggression by meeting with Vladimir Putin, his Russian counterpart, today.

While the threat of a Russian invasion of Ukraine remains a very live threat, the current phase of sabre-rattling of Russia, met with stern rhetoric by Western countries, has been going on for sufficient time that markets have priced in the stand-off. It will take a further deterioration or unexpected acquiescence to create a fresh price reaction.

Looking ahead, results of corporate heavyweights such as BP, Unilever, AstraZeneca and GlaxoSmithKline will determine the trading mood, with strong earnings expected from at least three of those firms given the huge spikes in energy prices and the vital role big pharma has played in providing an exit route from the coronavirus pandemic.

Kinesis Gold Price Analysis

Gold has started the week on the front foot by making fresh gains after climbing above and successfully holding above the psychologically important threshold of $1,800 an ounce.

While today is set to be a quieter day of trading, gold’s medium-term direction will be governed by how quickly the Federal Reserve decides to implement the more hawkish strategy officials spoke more explicitly about last week.

Any hikes will likely strengthen the dollar and place gold under pressure due to its inverse correlation with the dollar, while with a March interest rate hike expected, any delay to that would be supportive for gold.

Kinesis Silver Price Analysis

Silver continues to push steadily upward and is now threatening the key level of $23 an ounce.

It will be interesting to see silver’s reaction if and when it breaks through $23. In the context of markets lacking a clear direction, if the metal can surpass and hold onto this new level, it would provide further evidence that fear remains a driving force in trading decisions – silver does have haven qualities, albeit on a much more reduced level than its golden peer. 

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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.