Market Overview

Risk evasion has clearly been seen at the beginning of the week and this has led to a strong rally in gold prices as gold is a traditional safe haven asset. Gold prices jumped from $1852 per troy ounce to $1876 this Monday. On Tuesday morning prices were even higher as they reached $1882 per ounce and scaled back to $1850 later in the day.

The uncertainty around a possible war between Russia and Ukraine is pushing gold prices up, as well as the Russia confrontation with the West world in general. Investors are deeply concerned by the record high inflation in the United States which is at 7.5%, a level which was lastly reached in 1982.

Gold is now acting more as a safe haven asset, a shelter from economic and political cataclysms. Further dynamics of gold prices might be directed by the development of the Russian-Ukrainian tensions, nuances of continuous negotiations between all parties of this conflict, and military buildup. On Tuesday important news was circulated that Russia said it would pullback its military after joint exercises with Belorussia near Ukrainian border. This news rolled back gold prices below $1850 per ounce.

Many factors are linked to the monetary policy of the Federal Reserve (Fed). Some closed discussions among Fed members on Monday indicated at possible  future actions of the Fed to tackle blistering inflation. Indeed, the Fed is thought to be inclined to go ahead with interest rate hikes and further monetary tightening, but no indications have been seen towards the speeding up of this process. The Federal Open Market Committee (FOMC) minutes, that will be published this week, are important in this regard, as well as the comments by Fed members on Thursday and Friday.

Technically, gold prices were unable to break through the important resistance level at $1882 per ounce, a maximum since November 2021. New drivers are needed to jump above this strong resistance. Once the risks are stabilised and monetary tightening actions are performed by the central bankers, the demand for gold may decrease. “Buy rumors, sell facts” principle may direct prices down towards $1800 per ounce. But the market may see the rise in prices again as the upward trend in gold is intact. However, any buy operations may be too risky at this point.

Disclaimer:

Analysis and opinions provided herein are intended solely for informational and educational purposes and don't represent a recommendation or investment advice by TeleTrade.