What an eventful week it has been for the commodity markets.
We have been reporting on Gold for many weeks now due to Gold’s improved status as a safe haven (overtaking the Yen and the Dollar in resilience). Gold has this week, revealed its strength in the wake of strong fundamental impacts the global markets have been facing.
Many investors and economists are focussing on the geopolitical tensions that have been increasing volatility in international markets and ultimately the precious metal increases, but that is not the only major impact Gold has been facing. The tensions between Ukraine and Russia have been mounting throughout the week (which stems back to issues in 2014), and markets have been flocking into Gold as a Safe Haven. The main focus is on the tensions and fear of war, but there are still inflation, PPI and Monetary Policy reports that need to be considered too.
As has already been made aware, CPI is at 40-year highs, which has thrown a curveball in the way of the Federal Reserve as they need to act and react quickly to tighten monetary policy. If interest rates are not raised enough to combat inflation effectively, inflation will cause drastic economic threats. PPI (which is a leading indicator of cost pressures in an economy) numbers were released at .03% points higher than expected: increasing concerns over costs of doing business. Fed Minutes were released on Wednesday night which revealed that some Fed Chairs are pushing for dramatic interest rate increases to as much as 150 basis points. In such a vulnerable time, will this be the right decision?
With all the economic releases, the geopolitical tensions are still at the forefront of the focus as Putin (yesterday) added around 7000 more troops to the Eastern border, increasing major concerns over conflict
Along with the fundamental influence, the technical aspect of the markets has also been extremely enticing.
As you will see, and previously would have noted, the gold technical price has been moving within a top and bottom trendline – respecting these levels consistently. There was a point where there was a breakdown underneath the bottom trendline, but that does not mean the trend structure had broken as the Fibonacci is still more than relevant as a support level, which proved its worth. Gold broke out bullish above the upper trendline, showing strength, tested a resistance level around $1877 and reversed back until it was met with major support from the broken trendline to touch levels not seen since last year June.
One cannot be too subjective or hasty when trading these movements as the markets do need to correct themselves, as they do not move up or down in one straight line. The chart is based on the Daily Feature.
**Disclaimer: This cannot to be construed as advice, it has been compiled purely as a guideline to responsible trading. Trade responsibly as your capital is at risk**