Gold Price Pushing Forward With Three Month High as Ukraine Tensions Escalate

Kinesis Money Macroeconomic Analysis

The current macroeconomic scenario is dominated by Ukraine tensions and the consequent invasion risk that threatens to follow. 

For months the inflation rate and the central bank’s monetary policy have been the main topic on the table for investors. However, that has all changed within the last few days, as the situation in Ukraine gains further involvement from Western leaders, which could be fanning the flames on the scenario. 

Stocks finished last week in red, with today’s early trading confirming this trend as European indices open well below the parity, losing between 2-3%.

On the currency markets, the U.S Dollar remains strong, while both WTI (West Texas Intermediate) and Brent (the benchmark for oil of the North European Sea) are being traded above 94. Now that the 100 dollar mark is not too far out of reach, this could push inflation up even further. 

Analyzing today’s market driver, the speech from St. Louis, Fed President James Bullard, suggests that traders’ attention seems to be focusing on the Federal Open Market Committee (FOMC) meeting minutes that will be released on Wednesday. Traders are attempting to understand further details about monetary policies and interest rate hikes forecasted for the next few months.

This afternoon, Christine Lagarde will hold a conference, celebrating the 20^th anniversary of the Euro. Although, investors are not expecting the European Central Bank governor to give further details about monetary policy today. 

Kinesis Money Gold Analysis

As is well known, bullion has historically proven to be a safe haven during market turmoil, particularly during the escalation of geopolitical tensions. Therefore, it was little surprise to see gold at a 3-month-high last Friday afternoon. 

After growing tensions between Russia and Ukraine, bullion sharply surpassed the $1,835 resistance level, accelerating to $1,860. In today’s early trading, gold is down but still holding above $1,850, while investors are looking for more clarity about the Ukraine situation.

From a technical point of view, the surpass of the $1,835 resistance zone could be seen as a bullish signal, with the resilience shown last week after the release of U.S. inflation data, now becoming a strength.

After the spike seen last Friday afternoon, gold started today’s trading with lower volatility. The first support zones are placed at $1,850 and $1,835, while the top reached in November at $1,875-1,880 represents a clear resistance.

Kinesis Money Silver Analysis

The price of silver finished last week by skyrocketing to $23.6. Despite a temporary weakness after the U.S. inflation data was above expectations, the silver price rebounded, following in the footsteps of the gold price trajectory. This movement is mostly due to the Ukraine tensions escalating, which are pushing investors to recalibrate their portfolios.

Silver is now steady at $23.6-23.7 in today’s early trading, while investors are waiting to see the evolution of the geopolitical situation.

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Carlo Alberto De Casa is an external Market Analyst for Kinesis Money.

He also writes as a technical analyst for the Italian newspaper La Stampa.

Carlo Alberto provides regular commentary for UK outlets including the BBC, Telegraph, the Independent Bloomberg & Reuters. He is also a commentator for CNBC Italy. He worked for Bloomberg as their Equity Research Fundamental Analyst before joining brokerage ActivTrades in 2011 to specialize in currency markets and commodities. In 2014 he published a book on gold and the gold market, followed by a new updated edition in 2018.

This report is not an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not a reliable indicator of future performance.