Stocks fall and gold rallies

Investors flee to safe haven investments

Friday 4 March 2022

In this week's market report:

• Stagflation worries markets

• Little downside for the Bulls

• Russia keeps its gold close to home

• The case for gold

• Investors buy Palladium

Dear Investor,

US dollar gold price [XAUUSD] 10 minute

Source: Blomberg
(Click to enlarge)

Russian-Ukrainian conflict continues to impact gold: Gold is up 1.7% this week to US$1,937 per ounce. The Australian Friday trading session has been an extremely volatile, with gold rallying to an intra-session high of US$1,951 on news of Russian shelling at a Ukrainian nuclear facility.

On this, Nick Frappell, Global General Manager of ABC Bullion said:

‘Gold rallied on news that the plant was under shellfire and on fire – however an update implied that the building on fire was the admin block and not the reactor hall. Ukraine is an ‘energy island’, so disabling the power plants nerve centre would be a step in destroying Ukraine’s energy grid.’

Global markets unsteady: The ongoing Russian invasion of Ukraine and failed peace talks have not alleviated market concerns. Major global stock markets continue to fall as investors opt for traditional safe haven investments. US crude nudges US$120 per barrel.

Palladium surges on supply fears: Russia is the dominant producer of palladium, with South Africa’s supply of the metal a distant second. Spot Pd has jumped 15% this week on concerns Pd supply will be impacted.

• Silver is up 4% to US$25.19, an important technical level. Silver has been rejected from this level in the past. Moving beyond here would be bullish for silver.

• Platinum has fallen 1.20% to US$1,084.

• Palladium has had a strong week, up almost 15% to US$2,768 per ounce. More below.

Fed rate increase is not ‘if’ but ‘how much’: The Federal Open Markets Committee starts on 15th March. As discussed here, the aggressive of rate hikes from the Fed is no longer expected.

• Fed Chair Jerome Powell has said he plans to support a 25 basis point increase.

• Powell added he is ‘prepared to move more aggressively by raising the federal funds rate by more than 25 basis points’ throughout the year if US inflation doesn’t recede.

Stagflation worries markets: Rising crude, slowing economic growth and a hawkish Fed have markets wondering if a bout of 1970s style of stagflation is next.

Bulls, this is not your week: At the time of writing, there was Russian shelling at Zaporizhzhia — Europe’s largest nuclear power plant, causing the gold price to trade up to US$1,950 though it has since retreated. In the short term US$1,970 is likely, with plausible targets above US$2,000 in the medium term.

Bears, the trade doesn’t favour you: Gold may fall to US$1,899, though this week leaves us with very bullish momentum in gold.

Gold in Australian dollars does its thing here: The Australian dollar rallied this week up 2.45% to 73.36 US cents. The rally has muted any gains in the Australian dollar gold price, with XAUAUD falling slightly to AU$2,638 per ounce, a 0.75