Bulls Gaining Momentum As Uncertain Weekend Looms

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The gold market is sharply higher in early action Friday as the war in Europe intensifies. The markets have also seen the latest non-farm payrolls data today, which showed a strong gain of some 678,000 jobs while estimates were looking for a rise of 440,000. Markets showed little to no reaction from the jobs data, however, as the war in Ukraine remains the focal point for investor attention. Gold appears to be benefitting from the increasing demand for safety, as stock indexes are sharply lower today.

 

There will likely be little to no appetite to go into this weekend short risk. Yesterday, Russian troops overtook Europe’s largest nuclear power plant. Reports earlier in the day Thursday said the plant was on fire and presented a significant risk. A fire that was reportedly in a training center has now been extinguished, and the facility is supposedly safe. The reckless fighting around the nuclear power plant earlier, however, seemingly suggests that Russian troops do not care or understand the potential risks involved. Ukraine is already home to the worst nuclear disaster in history, the Chernobyl power plant, and yesterday’s events risked a much larger catastrophe.

 

The fighting around the power plant yesterday may be indicative of Russian attitudes. The entire Russian invasion has been described by some analysts as “reckless”  and further lack of care could spell disaster for the country and all of Europe.

 

Dissent in Russia had been on the rise before Moscow took action. Russia has now banned reports that refer to the military action as a “war.” Thousands of arrests have been made as Putin looks to extinguish any dissent as quickly as possible. Russian leadership appears ready and willing to continue its invasion despite the risks which may be increasing by the day.

 

Russia is already suffering from sanctions not levied against a country before. Further steps may be necessary, however, to change Russian thinking. Those steps could include sanctions against Russian oil and natural gas-two areas untouched by sanctions thus far. Whatever the case may be, the West may continue its current path of attempting to squeeze Russia economically before any military action is even considered.

 

The gold market will likely remain on the offensive as long as the fighting continues. Now approaching the $2000 per ounce level, the gold bulls may see new all-time highs in the weeks ahead. A stop to the fighting or reversal in Russian thinking, however, could cause a sudden and significant decline in gold. Any decline seen in the yellow metal may be met with aggressive buying, however, as there are numerous other reasons to be long the metal. Hot inflation, lower stocks and uncertainty over geopolitics may all keep gold on the ascent in the months to come. The bulls’ next target is a close above the February highs around $1976. The bears will look for a decline in price to below the $1850 level.

Gold Flat As Risk Aversion Remains Elevated

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The gold market had gotten the day off to a strong start, rising by several dollars per ounce. That initial strength quickly dissipated, however, once markets got the latest weekly jobless claims data. The weekly claims saw a moderate decline, and the decline of about 18,000 jobs put weekly claims below consensus estimates. Continuing jobless claims are now at a level not seen since 1970 in what may be viewed as a sign of economic strength. While the data took the wind out of gold’s sails in early action, the yellow metal has not fallen too far. In fact, any dips in gold are likely to be bought at this point, as the ongoing war in Ukraine and against inflation rage on.

 

Fed Chairman Jerome Powell will testify again today before lawmakers. Yesterday, Powell signaled that a 25-basis point rate hike was on the way and would be seen next month. While things can change, this likely puts an end to any debate over whether the Fed could hike rates by 50-basis points.

 

The war in Ukraine continues to have a significant market impact. Crude oil prices hit over $116 per barrel overnight, the highest level in over a dozen years. The dollar is also stronger today while the benchmark Ten-Year Note is seeing a yield of 1.854%. Market action points to ongoing uncertainty and traders as well as investors appear content playing it that way. Stocks are mixed in early action today as the VIX eases just slightly in early action. The gauge still reads over 30, however, and could have a lot of room to rise further if things deteriorate in Ukraine.

 

As the price of crude oil rises, the threat of an oil shock may also be on the rise. Traders and investors have thus far avoided Russian energy products in an effort to steer clear from any possible sanctions related troubles. In addition to this, OPEC has not signaled it would raise its quota-at least as of yet-and talks with Iran remain unresolved. The combination points to a troubling possibility of an oil shock. Tightening supplies may keep prices on the offensive in the weeks ahead. A major or sudden shortage, however, could fuel a price spike capable of crippling the economy. The threat of an oil shock comes at a very bad time, as people are already having to battle higher prices as inflation soars to levels not seen in decades.

 

The gold bulls will look to take prices beyond the February highs in the $1976 area. The bears will look for a decline below support at the $1850 level and then again at $1800. A move in either direction could be sustained and could see the market take off higher or lower. Of course, we feel right now that there are far more reasons for higher gold than lower, and as such will keep our eyes open for opportunities on the long side. Any dips seen in gold should be bought, barring a close below the levels mentioned above.

Bulls Showing Force

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The gold market is sharply higher at lunchtime Tuesday as keener risk aversion and anxiety continue to plague markets. The gold bulls have overtaken key resistance on a closing basis today, as prices have run right through the $1923 level like a knife through warm butter. The question now becomes whether the bulls can make a sustainable move higher or if prices deflate quickly on an easing of tensions. Such a calling of tensions does not appear to be in the cards anytime soon, however, as the Ukraine/Russian conflict seems to be deteriorating by the day.

 

The 1.5 year high seen in gold today may be met with some degree of skepticism. The yellow metal likely has at least $20 per ounce of risk premium built into prices currently, if not $40 or even more. Any signals for an easing of the war in Ukraine could be met with heavy selling as longs liquidate positions. Of course, the market may also be higher due to other reasons such as inflation. Those reasons have seemingly taken a back seat to the war, however, and the armed conflict is likely the primary driver of gold right now.

 

Ukraine, to its credit, has put up much heavier resistance to the Russian invasion than some had anticipated. The heavier resistance against Russian forces has likely caught President Putin off-guard, and the crippling sanctions slapped against the Russian economy are also being felt. With Putin seemingly on edge, markets now wonder what his next moves could look like. If Russians become even more turned off by the conflict, is a military coup attempt possible? Could Putin turn to his nuclear arsenal? Would he strike Western countries? These are all questions being asked already. The answers to such questions may remain unknown for quite some time still, and that may keep markets on edge for a long period of time.

 

Crude oil is having a strong run higher today, with the latest price for a barrel of oil at over $106. The dollar is also stronger today while treasury yields have declined. This market action is indicative of the angst currently within the marketplace and shows the fear currently being felt by investors. The potential for an oil shock, for example, is very real and a legitimate risk. A sudden and sharp drop in crude supplies could put the world economy onto very thin ice. The higher crude price is also feeding the inflation narrative at a very poor time.

 

The gold bulls remain in firm control on the daily timeframe. The uptrend in place has been established over several weeks now and the bulls will likely target the February highs around $1976 as their next stop. The bears will look for a decline on a closing basis below the $1850 level to gain momentum. If the bills are able to produce a close above last month’s high, the stage could be set for a quick and significant run higher that could see prices extend all the way towards previous all-time highs.

Gold Rises As Anxieties Increase

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The gold market is showing some strong upside in early action Monday as the new trading week gets underway. The general sense of “risk-off” is being fueled by several issues, with the ongoing Russian/ Ukrainian war being at the forefront.  As the geopolitical situation deteriorates further, the risks to stocks and risk assets may increase further. This, in turn, may fuel further buying in perceived safe-haven assets such as gold, and the market could potentially see a rapid run to $2000 per ounce or higher.

 

Russia and Ukraine are supposed to hold talks today about a de-escalation. The President of Ukraine reportedly said he did not feel much would come of today’s talks. Russian President Vladimir Putin recently put his nuclear forces on high alert in another sign that he may be willing to go even further than previously thought. Some analysts believe that cyber attacks from Russia on the West could be seen next. With the Russian President having seemingly backed himself into a corner, some are also entertaining the worst possible outcome: A nuclear exchange between Russia and the U.S.

 

Recent sanctions slapped on Russia may very well cripple the nation’s economy. The removal of several Russian banks from the SWIFT system could also stop commodity trade from the region, possibly causing a further rise in commodity prices at a time when prices are already moving sharply higher.

 

As the effects of sanctions are felt, the Russian Ruble sank to a record low versus the dollar. The Russian central bank said it would begin to buy gold on the open market as it was also forced to raise its main interest rate from 9.5% to a whopping 20%. What Russia does next is anyone’s guess, but it seems that President Putin may hold the keys to the country’s future in his hands.

 

The gold market is also rising due to accelerating inflation. Prices remain high and could go even higher in the months ahead. While it was thought for a period of time that the Fed could hike rates by a half-point next month, the war has eroded that outlook and a 25-basis point hike is far more likely.  This hike is not likely to have much, if any, effect on inflation but may be the first of several hikes to be seen over the year. While the central bank has just three rate hikes penciled in thus far, most analysts agree that the Fed may have to hike rates four, five or even six times or more to gain the desired effect. The threat of several rate hikes may keep stock investors wary and could keep volatility elevated for much of the year.

The bulls remain in form control on the daily chart. The next upside target will be the recent highs in the $1970s. The bears will attempt to force a decline in price, ideally back below the $1850 level on a closing basis.

Will Russia Negotiate?

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The war in Ukraine has had a profound effect on global markets. Yesterday’s full-on assault by Russian troops opened the door to further sanctions, West aggression, and other issues that could complicate the situation further. Markets are singing a very different tune today, however, as it appears that Russia may be open to dialog. After hitting a 1.5 year high yesterday, the yellow metal then proceeded to give back all of the day’s gains and then some. It is being sold off, even more, today, with spot prices currently down some $18 per ounce. The metal is now firmly below the $1900 level in what may be viewed as a major blow to the bulls. The metal could potentially see a decline back to the $1850 zone before finding some solid buyers.

 

Although the conflict remains highly fluid, rumor of Russian willingness to negotiate, primarily with China, is giving markets some breathing room today. The Dow Jones Industrial Average is higher by nearly 600 points in mid-morning action and the S&P 500 and Nasdaq are also sharply higher. Of course, whether these markets will retain such gains going into the weekend is another question entirely. Market anxiety is way down from early yesterday, however, and lower levels of anxiety may give investors reason to buy the dip.

 

President Biden has made clear he has no intention of sending American troops into the conflict. Western economies appear content, in fact, to sit and watch the conflict unfold as it may. A mistake by Russia, NATO or others could, however, change the dynamics quickly and is a major risk as the war gets going.

 

Several markets that had overreacted yesterday have seen large retracements already. These include stocks, gold, treasuries and grains. The Russian stock market at one point Thursday saw half of its value erased before rebounding. With the Russian currency, the ruble, getting hammered, some fear that Putin may be forced to sell a large quantity of the nation’s gold to support it. Time will tell how the conflict affects markets, but rising volatility is likely to be seen and major price swings are increasingly likely until the war is concluded.

 

Gold prices are still trending higher on the daily timeframe, although the bulls appear to be a bit tired at this point. A period of consolidation may now be necessary before the bulls can take prices higher in a sustainable manner. The bulls’ next target is to produce a close above yesterday’s highs in the $1976 area. The bears, on the other hand, will look for a decline below support at $1850 and then $1800. A close above or below these levels may add needed momentum for either the bulls or bears to continue moving the market. In the meantime, the gold market is likely to take its cues from the ongoing conflict and the data stream. The Fed, which will almost certainly hike rates next month, could also play a role in gold’s price action if it signals any possible changes to policy or its plans regarding policy.

Gold Lower As War Under Way

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Its official-Russia has launched a full-scale invasion of Ukraine. After stationing troops along the border for weeks, Russia has now given the order to move into Ukraine. The news sent markets into a tailspin. Stocks were down sharply earlier in the day, with the Dow Jones Industrial Average declining by over 700 points at the session lows. Gold shot higher, trading up near the $2000 level in the overnight session, running out of gas around the $1976 area. The yellow metal ajs since backed off sharply, however, as traders and investors reassess the Ukraine/Russian conflict. The metal has, in fact, dropped below the $1900 level in late afternoon trade as the Biden Administration issues new sanctions against Russia.

 

The new sanctions announced by Biden today will target more Russian banks as well as the country’s ability to do business in alternative currencies including yen, pounds, euro and more. President Biden suggested that the war is a “premeditated attack” and Russia will now bear the consequences of its actions. The President reiterated that the sanctions are designed to have a long-term impact on Russia while minimizing any effects felt by the U.S. and its allies.  The Biden commentary sent markets moving. Gold declined and not only gave up all of its overnight and daily gains but went deeply into negative territory.

 

The Russian/Ukrainian war could have an effect on the Fed and its tightening plans. While the Fed is still expected to begin tightening next month, the pace of any further hikes could potentially be slowed due to the conflict. Not only are markets having to watch the effects of war, but there may also be the risk of an oil shock. Oil prices hit over $100 per barrel earlier in today’s session, and a rise in tensions over the conflict has the potential to disrupt supplies, possibly leading to sharply higher prices. Stronger crude would not be a good thing, either, as it may come at a time when inflationary pressures are already being felt by the public. Higher energy costs could cause the public to cut back on spending, and as spending declines, so does economic output.

 

Fed policy has already likely been very complicated due to the ongoing viral pandemic. Now, the Fed will also be forced to contend with war and the possibility of an oil or commodity spike. These issues may cause the central bank to rethink its plans, although they are unlikely to stop the Fed from taking interest rates higher. The issues may, rather, give the Fed reason to slow down their tightening or take a more modest approach to policy normalization.

 

Recent developments have lessened the likelihood of a half-point hike by the Fed next month. Fed Funds Futures now show a less than 10% probability of a half-point hike. The central bank will almost certainly hike by 25 basis points, as usual, and point to further hikes down the road.

Bulls Still In Firm Control

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The gold market is higher today as markets digest the Russian invasion of Ukraine. Against a backdrop of bullish fundamentals and technicals, longs stepped into the market again today, buying the decline seen earlier in the session. With spot gold now standing around the $1908 level, the bulls are nearly halfway through a key resistance band from $1903 to $1923. If the bulls are able to mount a run higher and close the market above $1923, the stage could be set for a rapid and sharp run higher that could see $2000 per ounce or beyond in the weeks ahead. Gold prices are now at an eight-month high as risk aversion has set in.

 

The Russian invasion of Ukraine remains at the top of the list for market concerns. The question now, however, is whether the situation will take another turn for the worse or if worst case scenario fears will not be realized. For the time being, it appears the West has no interest in a military confrontation. Additional sanctions have been slapped on at this point and it is likely the U.S. and its allies will take a wait and see approach to gauge their effectiveness. That being said, however, a change in the dynamics of the conflict could change things quickly. A full-blown invasion deep into Ukraine, for example, has the potential to provoke the U.S. and its allies into military action. A full-blown ground war is something

no one wants to see. The casualties from such a conflict could be astronomical and it could set U.S./Russian relations back for decades to come.

 

While the marketplace appears to be slightly calmer about the situation today, the slightest mistake by Russia or the West could lead to war. Markets have a tendency to overreact to such situations, seemingly always planning for the worst-case scenario. Investors may now be wondering if the markets have already adequately priced in the risk of war or if the fear and anxiety have already peaked. If tensions do calm from here going forward, the gold market is likely to see a decent pullback in price as it likely has at least $20 worth of risk premium built into the price at this point. If tensions escalate, however, the gold market could see a rapid rise that takes it to $2000 or back to previous all-time highs. With little chart resistance in the bulls’ way, the market could run higher rapidly, forcing more shorts to cover in the process.

 

Inflation also remains a large source of concern for markets and is likely not going away anytime soon. The Fed has already suggested it plans several hikes this year, with the first set to take place in a few weeks. Markets now seem to believe that the Fed will hike rates by a full half-point next month for the first time in over 20 years. The last such hike ended the dot.com era for equities, and it could have similar consequences this time around.

The War Watch Continues

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The gold market is trading slightly higher around lunchtime Tuesday as things heat up further between Russia and Ukraine. Gold traded up to an eight-month high today as risk aversion has again set in and as investors seek out perceived safe-havens. Constructive charts combined with the geopolitical scene are making it easy for investors to buy gold. Positive momentum could carry the metal higher as it faces an important test of technical resistance.

 

Investors and traders returned from a long holiday weekend to see that Russia is now putting troops into breakaway parts of Ukraine. Russia has called the move a peacekeeping mission, although that description has left the U.S. and its allies scratching their heads. The U.S. and its allies have already initiated sanctions against Russia. Germany has halted certification of a major oil pipeline into Russia, yet Russia appears to be intent on invading Ukraine. According to the U.S. Russia now has nearly 200,000 troops stationed along the Ukraine border. It is difficult to imagine a reason for such a buildup that does not include an invasion of Ukraine by Russian forces.

 

The rising Russian/Ukraine tensions are having an effect on global markets. Crude oil prices shot higher overnight, hitting a 7.5-year high of $96 per barrel. The stock markets are also being hit today. The benchmark Dow Jones Industrial Average is down nearly 600 points in the early afternoon. With a couple of hours left in the trading day, volatility and selling could take over and fuel a massive down day for equities that could lead to declines of several percentage points. The dollar is steady at mid-day, while yields on the Ten-Year Note are currently fetching some 1.925%. Yields have declined from recent highs over the 2% level as safe haven buying has lifted demand.

 

The gold market has backed off from overnight highs. Given the metal’s demand from buyers looking for safe havens, it is not surprising that it is off of overnight highs. Some traders and investors likely decided to take a quick profit. There is almost certainly a significant amount of risk premium built into the price of gold currently, and if tensions start to calm the market could see a sharp pullback.

 

The bulls remain in firm control of the market on the daily chart and a steep uptrend is in place. The bulls next target is producing a close above the May 2021 highs near $1923 per ounce. If this level is cleared, the market could really pick up significant steam and could possibly rocket higher to $2000 or beyond in short order. The bears, on the other hand, will still target a close below the $1800 level as a starter with the $1780 area next. Although the metal is still in no man’s land, it does appear to be inching higher and the bulls may have the advantage in the weeks and months ahead.

Gold Sees Mild Pullback To End Exciting Week

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After some exciting upside that saw gold reach $1900 per ounce late this week, the yellow metal pulled back slightly Friday as traders likely chose to book some profits. Although gold finished the day session down, it did not end up at the lows of the day as buyers seemingly stepped in to buy the dip. The metal may have also been bought off the session lows as traders eyed Ukraine nervously heading into the weekend.

 

Stocks have seen some movement to end the trading week as well. In late afternoon action, the benchmark Dow Jones Industrial Average is down nearly 200 points. Today’s equity declines come on the heels of major declines in yesterday’s session. The bears are in control of stocks on the daily chart currently, and the path of least resistance is sideways to lower prices.

 

Dominating the financial headlines this week was the possibility of a Russian invasion of Ukraine. Russia has amassed some 150,000 troops along the Ukrainian border and it is difficult to imagine why the country would park such a large force there if it did not intend to invade. The U.S. has said that it believes an invasion is imminent. Any increases in hostilities over the weekend could have dramatic consequences for markets when they reopen Sunday evening. While the U.S. has intelligence that Russia plans to invade, Russia has said it has no intention of invading its neighbor. Adding to global anxiety over the potential for armed conflict, Russia today announced that it will be conducting nuclear drills.

 

The biggest wildcard for this situation now is how an invasion could be responded to. The U.S. and its allies have suggested that further sanctions against Russian interests could be administered, but the possibility of a ground war is the biggest concern. Any U.S. response to an invasion of Ukraine would likely depend on the severity of the invasion. If Russia sends all 150,000 troops into Ukraine at once, a response could be swift and severe, leading to an armed conflict the likes of which has not been seen in some time. A smaller incursion of Russian forces, on the other hand, may only garner additional sanctions or another economic punishment as a deterrent.

 

Markets are not only concerned about a possible war, but are also very worried over ongoing inflation pressure. This week saw several “hot” inflation reports, suggesting that inflation may now be entrenched and it could take some serious time and action from central banks to reverse it. The first such action is very likely to happen in the coming weeks. The Fed could be gearing up for a half-point interest rate hike next month or possibly sooner. This would be the first such hike since 2000 at which time the dot.com bubble popped. Stocks could react in a very similar fashion this time around as well. The bears are already pushing equities lower and the path of least resistance remains sideways to lower.

Gold Hits $1900

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The gold market is having a strong upside day as prices have hit the $1900 level before taking a breather. The eight-month high in price is likely due to increasing risk aversion as worries over Russia and Ukraine mount further. Risk tolerance is sharply lower today as a Russian invasion of Ukraine appears to be imminent. President Biden also gave a somber update of the situation earlier today. Russia not only appears to have not removed any troops as was previously thought, but appears to have added several thousand more along the border.

 

The possibility of a Russian invasion is a major source of global concern. It is unclear how the U.S. and its allies might react to an invasion, but a full-blown ground war does not appear to be out of the question. Such a military conflict could be on a grand scale and could change U.S./Russian dynamics for some time to come. The worry over a Russian conflict comes at a time when markets are already grappling with several other worrisome issues, including inflation and the potential for higher interest rates.

 

The gold market is seeing benefit from several different angles currently and combined those angles have significant power to move the market. The threat of military conflict, inflation, weaker than expected economic data and a slowing economy are all likely providing gold some lift while weighing on stocks and risk assets. As the hawkish Fed begins to tighten rates next month, the central bank could run the risk of putting the economy back into a recession. It appears that the Fed currently believes inflation to be the greater risk, however, and as such it will act accordingly. Multiple rate hikes coupled with a balance sheet contraction could, however, be too much for markets to bear. As investors flee stocks and risk assets over the next several months, much of that capital could find its way into the gold market as investors seek out alternative asset classes to put capital to work in.

 

The gold market may face another key upside test in the days ahead. Although the metal has had a good run up today, the real test may be in the $1903-$1923 range. This $20 zone may act as a major upside buffer and resistance zone, and could leave the bulls frustrated and tired. If the market is able to surpass the $1923 area on a closing basis, however, the stage could be set for a rapid and sharp rise higher. Such a move could extend to previous all-time highs or beyond. With little, if any, chart resistance in the way, the bulls could potentially have a field day taking prices higher.

 

An escalation of Russian/Ukrainian tensions could potentially drive gold through upside resistance in short order. If tensions calm over the next few days, the bulls may elect to take some profits and the market could enter a back and fill mode for a bit. Either way, the bulls are now in firm control of the daily chart and any dips are likely to be aggressively bought.