Jump to content

Gold Prices Eyeing $1910 as Putin Orders Troops into Eastern Ukraine


Recommended Posts

GOLD PRICE OUTLOOK:

  • Gold prices surged to a fresh 8-month high of $1,909 as the Ukraine situation deteriorated
  • Putin recognised two breakaway regions in eastern Ukraine as independent and planned to send “peacekeeping forces” to the area, marking a dramatic escalation of the Ukraine crisis
  • Gold prices may be eyeing $ 1,916 for immediate resistance, breaching which may open the door for further gains
Gold Prices Eyeing $1910 as Putin Orders Troops into Eastern Ukraine

Gold prices extended higher to $1,909 during Tuesday’s APAC mid-day trading session following a drastic escalation of geopolitical tensions in Eastern Europe. Russian President Vladimir Putin ordered “peacekeeping forces” to two breakaway regions in eastern Ukraine after recognizing their independence on Monday. There were no details about how many Russian troops are to be sent, or when.

Washington said the move was part of Moscow’s attempt to create a pretext for a further invasion of Ukraine. The US and Europe may ramp up new sanctions against Russia if the situation deteriorates further. US President Joe Biden will issue an executive order soon to prohibit “new investments, trade and financing by US persons to, from, or in” the two breakaway regions, the White House said.

Escalating geopolitical unrest may pave the way for heightened market volatility and buoy demand for gold, which is widely perceived as a haven asset. Since the Ukraine situation is highly fluid and ambiguous, gold prices may have more upside potential to go until the political skies are clear. Furthermore, heightened geopolitical tensions appear to be outweighing worries about Fed tightening in recent days, alleviating pressure on the yellow metal.

Demand for safety also drove up prices of US Treasury notes, sending their yields lower. The rate on 10-year inflation-indexed securities fell 8bp to -0.59% from -0.51% a day ago, making non-interest-bearing gold more appealing to investors as the opportunity cost of holding the precious metal drops. Gold prices and the 10-year real yield historically exhibit a negative correlation, which can be visualized on the chart below.

Gold Price vs. 10-Year Inflation-Indexed Security

Gold Prices Eyeing $1910 as Putin Orders Troops into Eastern Ukraine

Source: Bloomberg, DailyFX

Technically, gold prices breached above a key resistance level of $1,876 and thus opened the door for further upside potential. The next resistance level can be found at $1,916 – the previous high seen in May 2021. The overall trend remains bullish-biased, as indicated by the formation of consecutive higher highs and higher lows. The MACD indicator formed a bullish crossover and trended higher, suggesting that buying pressure may be building.

Gold - Daily Chart

Gold Prices Eyeing $1910 as Putin Orders Troops into Eastern Ukraine

Chart created with TradingView

--- Written by Margaret Yang, Strategist for DailyFX.com. 22nd Feb 2022

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • Posts

    • Sainsburys full year earnings and Unilever’s first quarter trading update both say the same thing, UK consumers are in for higher prices. The war in Ukraine, supply chain issues and the effects of ongoing Covid all to blame.      
    • US Dollar (DXY) Daily Price and Analysis US Q1 GDP may stall the greenback’s advance. A 20-year high nears for the US dollar. The multi-month US dollar rally continues with the greenback printing a fresh high today ahead of the first look at US Q1 GDP at 12.30 GMT. The US dollar basket (DXY) has been boosted by renewed weakness in the Euro and the Japanese Yen, as investors move from lower-yielding to higher-yielding currencies, while safe-haven flows continue to benefit the greenback. The US growth release later in the session is expected to show a sharp slowdown from the robust Q4 figure of 6.9%. The markets are currently pricing in growth of just 1% for the first three months of this year, with the slowdown mainly due to a reduction in inventory accrual over the quarter. This release is unlikely to move the greenback, unless there is a large miss or beat, as the Fed believe that 2022 US growth will be robust enough to let them tighten monetary policy sharply without damaging the economy. The latest US Core PCE data – the Fed’s preferred inflation reading – is released on Friday and this may have more effect on the US dollar than today’s GDP data. For all market moving economic data and events, see the DailyFX Calendar. The ongoing US dollar rally has been aided by weakness across a range of G7 currencies including the Euro, the Japanese Yen, and the British Pound. The Euro continues to battle with lowly growth expectations, exacerbated by energy concerns, the British Pound is mired by weak economic data, while the Japanese Yen is in freefall as the BoJ continues with its ultra-loose monetary policy.   The US dollar continues to press higher and looks set to break above 103.96, the March 2020 high. Above here the US dollar would be back at levels last seen nearly two decades ago. The March resistance will likely hold in the short-term, especially with month-end portfolio rebalancing at the end of the week, but US dollar strength is set to continue in the months ahead. USDOLLAR (DXY) WEEKLY PRICE CHART – APRIL 28, 2022 {{THE_FUNDAMENTALS_OF_BREAKOUT_TRADING}} What is your view on the US Dollar – bullish or bearish?   Apr 28, 2022 | DailyFX Nick Cawley, Strategist
    • While Tesla has nothing directly to do with Elon Musk buying Twitter - TSLA stock closed down 12% on news that Musk may have to sell stock and use other holdings to stand against the loan to finalise the purchase of the social media giant.        
×
×
  • Create New...