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.
Analysis and opinions provided herein are intended solely for informational and educational purposes and don't represent a recommendation or investment advice by TeleTrade.
Risk Warning: Trading Forex and CFDs on margin carries a high level of risk and may not be suitable for all investors. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76.41% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Prior to trading, you should take into consideration your level of experience and financial situation. TeleTrade strives to provide you with all the necessary information and protective measures, but, if the risks seem still unclear to you, please seek independent advice.
© 2011-2022 Teletrade-DJ International Consulting Ltd
Teletrade-DJ International Consulting Ltd is registered as a Cyprus Investment Firm (CIF) under registration number HE272810 and is licensed by the Cyprus Securities and Exchange Commission (CySEC) under license number 158/11.
The company operates in accordance with the Markets in Financial Instruments Directive (MiFID).
The content on this website is for information purposes only. All the services and information provided have been obtained from sources deemed to be reliable. Teletrade-DJ International Consulting Ltd ("TeleTrade") and/or any third-party information providers provide the services and information without warranty of any kind. By using this information and services you agree that under no circumstances shall TeleTrade have any liability to any person or entity for any loss or damage in whole or part caused by reliance on such information and services.
TeleTrade cooperates exclusively with regulated financial institutions for the safekeeping of clients' funds. Please see the entire list of banks and payment service providers entrusted with the handling of clients' funds.
Teletrade-DJ International Consulting Ltd currently provides its services on a cross-border basis, within EEA states (except Belgium) under the MiFID passporting regime, and in selected 3rd countries. TeleTrade does not provide its services to residents or nationals of the USA.