Invasion threat lifts gold
18 February 2022
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Friday 18 February 2022
In this week's market report:
Fear drives gold higher
Gold up in major currencies
Geopolitical tension unlikely to stop Fed hikes
Dear Investor,
US dollar gold price [XAUUSD]
Daily chart
Source: Trading View
(Click to enlarge)
Fear drives gold up: Gold has enjoyed a strong run this week, up 3.50% overall. The yellow metal reached an intra-session high of US$1,901 overnight, reaching a seven-month high.
All precious metals rally this week: All other precious metals rose this week, with Pt seeing the biggest gains.
Silver is up 2.76% to US$23.83
Platinum has seen a strong rise, up 6.49% to US$1,096.56 per ounce
Palladium up 5.06% to US$2,366.36
Gold at yearly highs when measured in major currencies: Gold in major currencies broke out to new highs:
XAUEUR and XAUJPY at highest level since August 2020
XAUGBP and XAUCAD at highest level since Jan 2021
XAUAUD highest since Nov 2020
Inflation didn’t move gold, but Russia did: The ‘one-two punch of inflation and Russia-Ukraine tensions’ writes Kitco:
‘It was rising levels of inflation that became the underlying force moving gold higher this year. With inflationary levels at a 40-year high and no quick solution to curtail inflation from moving higher, it will likely continue to have a major impact on gold taking the precious yellow metal higher throughout the year. Add to that the recent geopolitical tensions between Russia and Ukraine and collectively you have a powerful one-two punch that could cause gold prices to retest the record high that occurred in August 2020 when gold prices reached an apex at $2088 per ounce.
‘But there is one certainty and that is as long as tension continues to grow the probability of a peaceful resolution will diminish. While all sides are hoping for a diplomatic solution currently it has become a war of words and accusations between Russia, Ukraine, NATO, and the United States. The most recent war of words increasing tension occurred yesterday with Western officials accusing Russia of not being truthful as it pertains to their statement that they have begun to pull back troops from the Ukrainian border.’
Bulls, will gold head to US$2,000 per ounce again?: Gold may look to test the May 2021 high of US$1,916 in tonight’s trading, with the potential to move to US$1,960s if geopolitical tensions increase into next week. A sustained rally may be challenged as institutional money remains on the sidelines for now.
Bears, if geopolitical tensions ease gold may fall: If there is any de-escalation from the Russia-Ukraine threat, it’s likely gold will fall. As ABC Bullion’s Global General Manager Nick Frappell noted, gold’s rally is sensitive to the unfolding conflict, writing in his monthly technical report, _‘_Take out the risk of a confrontation and everything else [real rates and the USD] suggests lower.’
Australian gold price rises: The Aussie dollar gains were no match for the spot rally this week. The Australian dollar has gained 0.50% on the US dollar, sitting at 72.02 US cents at the time of writing. However, spot gold’s stunning rally this week means the Australian dollar gold price is higher by 3% to AU$2,626 per ounce.
Australian gold price [XAUAUD]
Daily chart
Source: Trading View
(Click to enlarge)
Geopolitical tension unlikely to stop Fed hikes
Increasing geopolitical tensions did raise some questions about potential Fed rates hikes, however Carol Schleif, deputy chief investment officer for private family office said:
‘It’s important to remember that the Fed isn’t going to start pulling back its support for the economy -- either in terms of the balance sheet purchases or interest-rate raises -- if they weren’t trying to cool a very strong economy.’
From Bloomberg:
‘U.S. equity futures climbed Friday and havens like gold and bonds slipped on the prospect of a meeting between American and Russian officials next week over the Ukraine standoff.
[…]
‘Treasury 10-year yields rose to about 1.98% and bullion retreated below US$1,900 an ounce, having scaled the mark Thursday for the first time since June. The [US] dollar was steady and the yen slid.’
[…]
‘Federal Reserve Bank of St. Louis President James Bullard said bringing down inflation may require the central bank to overshoot a neutral target interest-rate, which he sees as about 2%.’
‘Federal Reserve Bank of Cleveland President Loretta Mester said she supports hiking rates next month and tightening policy at a faster pace if needed to curb price pressures.’
Inside our office this week…
The gift of gold. This week our most popular item was our PAMP 2.5 gram gold pendants. Were some people lucky enough to receive gold as a Valentines gift?
Until next time,
Shae Russell
Group Communications Manager,
For ABC Bullion
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