Gold Prices on The Up
It’s been an interesting week for traders with plenty of notable action. We’ve seen some key developments in the fundamental space with better-than-expected US CPI and retail sales along with developments in the Russia/Ukraine situation. Indeed, its been the latter which seems to have attracted the most focus this week and, talking with traders, it seems the move that most are concerned with is the more than 3% rally in gold prices. So, let’s take a look at what caused the move and, as ever, if you caught it? Well done! If not? There’s always next week.
What Caused the Move?
Safe Haven Flows Supporting Gold
The rally in gold prices this week has been a very direct response to the lingering uncertainty around Russia/Ukraine tensions. The market has been caught in a difficult whipsaw this week, jolted around by contrasting reports. On the one hand, media in the West continues to fear-monger, warning that a Russia invasion is coming imminently. US officials have also been keen to warn of intelligence suggesting that Russia is planning to invade. However, Russia continues to deny such plans and, earlier in the week at least, tensions cooled slightly amidst reports that Russia was bringing troops back from the border, saying that the army was merely carrying out military drills.
Neurotic News-flow
However, as the week progressed, media reports and US officials continue to warn over the ongoing Russian military build-up at the border with Ukraine, suggesting that an attack is still highly likely. With this in mind, risk assets have remained pressured across the week with gold and the Japanese Yen drawing safe haven bids. It is gold, however, which has seen the greatest inflow and looks set to remain supported near term unless we see a dramatic de-escalation of tensions.
Weaker US Dollar
Gold prices have also been helped this week by the weakness in the US Dollar. The greenback has been softer this week, despite better-than-expected US data. For now it seems that there is little to suggest that the Fe dis likely to raise rates above the expected 0.25% hike which is well baked in at this point.
Technical Views
Gold
The rally in gold prices this week has seen price breaking out above the 1871.04 level. With both MACD and RSI turning higher, the focus is on a continuation towards the 1919.92 level, while the former holds as support. To the downside, should we see any corrective action below the 1871.04 level, bulls will look to use the 1826.71 level and bull channel ow as support.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.