Russia-Ukraine conflict – $100 gold price swings and volatility warning

Gold saw $100 price swings on Russia's invasion of Ukraine. In an initial reaction, gold hit the highest levels since September 2020 but could not hold the gains. After markets received some clarity around new Russia sanctions, gold dropped back below the $1,900 an ounce level. Here's a look at Kitco's top three stories of the week:

3. Dramatic price swings: Gold price sheds $90, silver price sees sharp reversal as analysts warn of more volatility to come

2. Watch palladium, gold, and silver prices as the West sanctions Russia in response to the Ukraine crisis

1. Gold's path to $2k: Fed rate hikes won't hurt gold price rally this year, says Wells Fargo

 

By Anna Golubova

For Kitco News

Time to buy Gold and Silver on the dips

 

 

David

Is gold price at risk of a bigger pullback after $100 swings?

After the initial geopolitical shock of Russia's full-scale invasion of Ukraine, gold has retreated below the $1,900 an ounce level. But analysts are still warning of high volatility ahead for the precious metal.

The gold market saw price swings of around $100 during the last couple of trading sessions as markets reacted to the crisis in Ukraine. April Comex gold futures were last at $1,885.40, down 2.12% on the day after hitting a 1.5-year high of $1,976.50 on Thursday.

Analysts point to clarity around sanctions as one of the reasons behind gold's pullback, adding that many were pricing in a much harsher response from the West.

"Some of the extreme political tension is off. We know Putin has invaded Ukraine in a much broader sense than we thought. And prior to that, the belief was that the response would be robust, which could very well include removing Russia from the SWIFT payment system. That didn't happen," TD Securities head of global strategy Bart Melek told Kitco News. "The sanctions, certainly judging by the markets' response, were not as strong and restrictive as they could have been."

One of the more significant outcomes was the energy market not getting hurt by sanctions, which means less oil supply stress.

"Oil prices have come off. Less inflationary expectations and higher real rates are not great for gold," Melek said. "The West is not sanctioning Russian oil or gas exports. And at the same time, we might get more support from OPEC."

On top of that, the West's disagreement over removing Russia from the SWIFT system shows that the severity of response will vary, Gainesville Coins precious metals expert Everett Millman told Kitco News.

 

"The resistance of many EU members to impose harsher sanctions from Russia, such as banning them from the SWIFT system, is part of the reason behind gold's reversal. Now it does seem like Europe is not aligned with the U.S. and Britain to impose the harshest possible sanctions. And that does de-escalate the crisis a bit," Millman said.

Plus, gold's geopolitically-triggered rallies usually run out of steam very quickly, he added. "That's what we saw in 2014 during the annexation of Crimea. I'm not surprised we gave back all the gains so quickly."

However, Melek warned that Russia-Ukraine tensions could reignite at any time. "During war the only thing we can be sure of is not knowing."

And Millman noted that investors should be ready for high levels of volatility going forward. "The focus of the gold market has shifted away from inflation and Fed policy to geopolitics and crisis in Ukraine. I'm expecting a lot more volatility until there is some resolution or diplomatic solution," he said.

Gold price could hit $2,000 'in only a matter of days' – analysts

Can't forget about the Fed

Aside from geopolitical tensions, good news for gold is the repricing of how many rate hikes the U.S. economy will see this year in light of the war in Ukraine.

For example, the Fed's 50-basis-point rate hike in March, which was at an 80% probability before, now is at just 24.8%, said Melek.

"The view here is that central banks may stay accommodative for longer than previously thought," he said. "This idea will support gold. Central banks don't want to remove liquidity when volatility is already elevated. They want to hit inflation hard, but they don't want to collapse the economy either."

Ukraine will be on the Fed's radar during the March decision, added Millman. "The geopolitical situation will likely prevent the Fed from hiking as many times as the markets expect. We'll get at least one rate hike in March. But it could be one and done, or we could see fewer rate hikes this year. I keep hearing 7-9 rate hikes in 2022. That's way too many," he said.

 

Gold's price levels to watch

Analysts are not ruling out a retest of the $1,850 an ounce level just because of how quickly the precious metal went from $1,800 to $1,900 an ounce.

"It is hard to be bullish when there is this much volatility. Even before gold's big move on Thursday, prices had blown past the $1,800 to $1,900 in just one week. I do think that we are due for a retest of some of those lower levels just because the price has moved so much so quickly," said Millman.

Melek is watching $1,860 an ounce on the lower end and $1,916 an ounce on the upper end, as he expects some range-bound trading next week.

 

Data next week

Aside from the focus on Russia's military action in Ukraine, markets will be paying close attention to Fed Chair Jerome Powell's testimony before both the House and Senate banking committees next week.

"[Powell's] hawkish commentary following the January Federal Open Market Committee meeting resulted in market interest rate hike expectations jumping higher with a strong chance of a 50bp interest rate increase priced in by financial markets. We suspect he will be more cautious next week given the financial market nervousness, and this will likely cement expectations for a 25bp rate increase on March 16," said ING chief international economist James Knightley.

On the data front, the U.S. employment report will be critical to watch, with market consensus calls expecting 438,000 jobs added in February.

Tuesday: U.S. ISM manufacturing PMI

Wednesday: U.S. ADP nonfarm employment, BoC rate decision, Beige Book, Powell testifies before U.S. House

Thursday: U.S. jobless claims, ISM non-manufacturing PMI, Powell testifies before U.S. Senate

Friday: U.S. nonfarm payrolls

 

By Anna Golubova

For Kitco News

Time to buy Gold and Silver on the dips

 

 

David

Dramatic price swings- Gold price sheds $90, silver price sees sharp reversal as analysts warn of more volatility to come

High levels of volatility are making their way through financial markets following Russia's attack on Ukraine, with gold seeing $90 price swings and silver posting a sharp reversal as investors digest the new geopolitical reality.

The precious metals market saw strong gains for most of the day following Russia's full-scale invasion of Ukraine. Gold hit a 1.5-year high of $1,976.50, and silver saw seven-month highs of $25.67.

However, both metals ended up losing ground and closing the session lower on the day as traders reassessed the situation. April Comex gold futures were last at $1,903.80, down 0.35% on the day, and March silver was at $24.21, down 1.40% on the day.

"The initial shock of what took place overnight with Russia and Ukraine sent all safe-haven metals higher, gold and silver specifically. Other commodities affected by Russia also moved up," RJO Futures senior markets strategist Peter Mooses told Kitco News. "And as the day progressed, things started to pull back. Margin calls had to be met, and traders had to get in and out of their positions due to the volatility the morning caused. There was profit-taking as well."

The bulk of losses came after U.S. President Joe Biden announced new sanctions against Russia, which targeted more of the country's banks, state-owned companies, and Russia's ability to do business in other currencies, including the dollar, euro, pound, and yen.

"This is a premeditated attack," Biden told reporters on Thursday. "Putin is the aggressor. Putin chose this war. And now he and his country will bear the consequences."

Markets were relieved to hear that U.S. forces would not fight in Ukraine and that new sanctions were signed not to hurt the energy market. "Our sanctions package is specifically designed to allow energy payments to continue," Biden said.

The president urged U.S. oil and gas companies not to exploit the Russia-Ukraine conflict to hike prices, adding that he will be releasing additional barrels of oil as conditions warrant.

Another boost to risk-on sentiment came after Biden decided not to impose sanctions on Putin himself or disconnect Russia from the SWIFT international banking system.

Biden's sanctions largely underwhelmed, which did take away from the risk-off sentiment, said OANDA senior market analyst Edward Moya.

"Gold prices quickly tumbled after it became clear it would not have a catalyst to take out the $2,000 level today. Gold's afternoon selloff accelerated after President Biden unveiled the next round of sanctions, which many thought was not hard-hitting enough given last night's Russian invasion of Ukraine," Moya said. "The decision not to kick Russia out of the Swift banking system means both Russia and Europe won't suffer immediate additional economic pain."

Gold price is not reacting to war in Europe, here's the real reason it moved up – Alain Corbani

However, precious metals investors should brace for more volatility ahead as Russia's invasion of Ukraine continues.

"Market reaction is saying the sanctions might help and we would not need the safe-haven as much as we thought overnight. That's why we saw some liquidation in the metals," Mooses said. "Tomorrow, we'll see what Russia's next move is. We should anticipate a lot of volatility, especially going into the weekend. There is a possible buying opportunity forming for anyone wanting to get back into the market and be long gold and silver."

Important to keep in mind that markets can surprise investors, especially in the post-pandemic environment. "We've seen over the past two years the market does not respond the way it used to. We saw with pandemic at times where we got bad news it made equities and other metals move higher and traders moved away from the metals as a safe haven," Mooses noted.

 

By Anna Golubova

For Kitco News

Time to buy Gold and Silver on the dips

 

 

David

Gold hits $1,930 as Russia-Ukraine conflict intensifies, bitcoin falls

Gold is up sharply after recent reports that the Russia-Ukraine conflict is intensifying.

Spot gold crested $1,930 an ounce Wednesday evening eastern time.

Bitcoin dropped, losing over 7% for the day and currently trading under $35,000.

According to reports by Reuters Russian President Vladimir Putin authorised a military operation in eastern Ukraine. Gunfire and explosion were heard over night in Ukrainian capitol, Kyiv.

 

By Michael McCrae

For Kitco News

Time to buy Gold and Silver on the dips

 

David

Gold is making its move as markets hit with geopolitical shock and recession fears

 

Anna Golubova  Saturday February 19, 2022 12:38

Kitco News

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Gold is trading at the highest level in over eight months. And analysts project more gains as we head into a geopolitically uncertain long weekend. Here is a look at Kitco's top three stories:

3. Bitcoin is 'paying the price' for Wall Street's 'de-risking' plight

2. Potential Russian invasion of Ukraine could tip economies into an 'outright recession' – Morgan Stanley

1. Gold price hits $1,900 on mounting Russia-Ukraine tensions and recession fears
 

By Anna Golubova

For Kitco News

Time to buy Gold and Silver on the dips

David

What's next for gold price? Geopolitics shock markets, growth outlook at risk

Don't be surprised to see some exaggerated moves in gold as the market goes into a geopolitically-tensed long weekend, analysts told Kitco News. But the outlook for gold remains bullish as the precious metal tests $1,900 an ounce.

It has been chaotic trading in the stock market this week with piece-meal updates on the geopolitical situation in Ukraine keeping investors in a risk-off mood. Also, the repricing of the Federal Reserve's rate hikes to battle four-decade high inflation saw investors leave risky assets and embrace safe havens such as gold.

Russia's military exercises are scheduled to end on Sunday, with troops' movements being the key development being watched. Meanwhile, U.S. President Joe Biden remains convinced that Moscow is planning an "imminent invasion."

All eyes are on the U.S. Secretary of State Antony Blinken meeting with Russian Foreign Minister Sergei Lavrov in Europe next week.

"Right now, investors are having a hard time handling all of these geopolitical risks, headlines, and incremental updates. There is not going to be an immediate resolution on Ukraine's situation," OANDA senior market analyst Edward Moya told Kitco News.

On top of the geopolitical angle, the big gold driver is economic growth concerns due to aggressive tightening by central banks.

Countries are finally coming out of the pandemic, but they face very sticky inflation. This puts growth outlooks at risk, Moya pointed out. And what this geopolitical story has done is pour extra fuel onto the global energy crisis by accelerating supply chain issues, which could feed into more aggressive central bank tightening.

"In the end, it will hurt growth, and that should be supportive for gold. We will be talking about an inverted yield curve [often seen as a precursor to recession or depression] a lot sooner than anyone anticipated. The outlook on Wall Street is quickly shifting," he noted.

Many investors are becoming concerned about where the economy will be in 12-24 months as Wall Street talks recession.

"We are going to see there's this scrambling towards cash across many investors. Flight to safety is growing. Even if we have an extended period of uncertainty as far as what will happen in Ukraine, you will still see continued move into safety. That should benefit gold," Moya said.

The inflation argument makes gold look very appealing to investors who are fleeing the risky stocks and crypto market, said Phoenix Futures and Options LLC president Kevin Grady told Kitco News.

"A lot of the gold's price moves are coming from the inflation story. We see inflation hitting 7.5%, which is a 40-year high. But if we use the same metric to measure the consumer price index (CPI) as in 1980, our inflation would be closer to 15%. People are realizing this, which is why gold is finally rallying. The Fed has no handle on inflation, and the energy market is facing a lot of pressures from high demand," Grady said. "Everyone is waiting for this Federal Reserve meeting in March to see how the central bank will approach inflation."

Gold price hits $1,900 on mounting Russia-Ukraine tensions and recession fears

Gold price at $1,900

Gold tested the $1,900 an ounce level on Thursday, reaching the highest level since mid-June. At the time of writing, April Comex gold futures were trading at $1,899.10, up 3% on the week.

There is more upside potential for gold going into next week, Moya pointed out. "There are elevated risks going into the long weekend. Risk sentiment soured, and there is not much that could bring it back quickly," he said.

As far as support and resistance levels for gold, $1,930 is going to be the critical resistance level on the upside, according to Moya. On the downside, gold has support at $1,880. "Given the holiday on Monday, you should not be surprised to see some exaggerated swings at the open," he added.

Grady is watching two levels from the end of May as resistance points — $1,919 and $1,922 an ounce. There is a lot of overhead resistance above these levels, he noted. Short-term support for gold is at $1,881.60, which was the February 16 high. If that doesn't hold, gold could retreat to $1,845 an ounce.

There is a risk for a pullback in gold if geopolitical tensions deescalate, Grady warned, stating that investors already saw this being partly played out this week. "Last Friday, we saw stocks collapse and gold explode after the U.S. warning that Russia could attack Ukraine' any day'. Then on Monday, we had a reversal as tensions calmed down. And then the cycle was repeated once again," he said.
 

Next week's macro data

On the data front, markets will be eyeing Fed speakers after scaling back their expectations of a 50 basis point rate hike at the March meeting back to 33%, according to the CME FedWatch Tool.

"Next week's Fed speak agenda includes a few hawkish voices (Bostic, Mester and Waller), which could revamp speculation on rate-hike front-loading and further help put a floor under the dollar," said ING FX strategist Francesco Pesole.

Tuesday: Manufacturing PMI, CB consumer confidence, Federal Reserve Bank of Atlanta President Raphael Bostic speaks

Thursday: GDP Q4, initial jobless claims, new home sales, Federal Reserve Bank of Cleveland President Loretta Mester speaks

Friday: PCE price index, personal spending, durable goods orders
 

By Anna Golubova

For Kitco News

Time to buy Gold and Silver on the dips

 

David

Gold riding the momentum wave to an eight-month high

Geopolitical uncertainty continues to dominate market sentiment, and gold has been able to ride this new wave of fear and momentum to an eight-month high of $1,900 an ounce.

Despite gold's 3% rally this week, the question remains: can the precious metal hold on to this momentum if and when tensions between the U.S. and Russia start to ease. As I have mentioned before, this is one of the reasons why I have never been a fan of buying gold as a safe-haven asset.

However, I have also noted that this time feels slightly different as inflation remains a dark cloud hovering over markets and exacting its toll on the global economy. As central banks worldwide react to rising consumer prices, many analysts are starting to ring the warning bell that monetary policy tightening could push the global economy into a recession.

Friday, Bank of America's chief investment strategist, Michael Hartnett, said in his latest note that "recession risks [are] rising." He said that he sees a scenario where over the next six months, "rates shock morphs into recession shock."

We are approaching the time when gold will shine. At some point, markets will realize that their monetary policy expectations have been too aggressive.

We are already starting to see expectations of an aggressive move in March being pared back. At the start of the week, markets saw a more than 50% chance of a 50-basis point hike. Markets now see a 30% chance of that happening.

What's next for gold price? Geopolitics shock markets, growth outlook at riskFrom the minutes of the Federal Reserve's January monetary policy meeting, we can see that the central bank wants to raise interest rates "soon." Ultimately, they will not sacrifice economic growth to rein in inflation.

When markets understand this fundamental truth, they will realize that real rates will remain extremely low, and that is where gold's true value starts to shine.

According to many commodity analysts, a perfect storm is on the horizon as rising interest rates will add volatility to equity markets, forcing investors to reduce their risk profiles.

However, in a world of still low interest rates, bond yields don't provide the protection they once did.

This week I had a chance to talk with John Reade, chief market strategist at the World Gold Council, and I asked him why investors should be paying more attention to gold. He noted that gold could be an important diversification tool for any portfolio or investor.

"We've issued various editions of the strategic case for gold in the U.K. and Europe and Australia, Russia, Singapore. Looking at the benchmark of assets that might be in a typical portfolio for each of those countries, you find very similar result," he said. "Somewhere between 4% and maybe the higher 10%, of gold in your portfolio seems to be optimal for increasing the risk-adjusted returns," he said.

It's also more than just gold that is benefiting. In an interview with Kitco News, Morgan Lekstrom, president and CEO of Silver Hammer Mining Corp, said that as gold starts to move higher, silver should start to shine.

We have also seen sharp moves higher in platinum and palladium as gold prices have rallied.

Have a great weekend
 

By Neils Christensen

For Kitco News

Time to buy Gold and Silver on the dips

 

David

60% market crash, governments seizing your money, shortage of food: Todd Horwitz's scary view

The Federal government of Canada recently invoked the Emergencies Act for the first time in Canadian history in response to the trucker protest in Ottawa.

Todd Horwitz, chief market strategist of BubbaTrading.com told David Lin that the stripping away of personal freedoms is not exclusive to Canada, and is only going to get worse around the world.

“That’s where governments are going anyways,” Horwitz said. “When people continue to vote in the directions that they vote and they give up their freedoms, you are proving to the government to do this because you keep voting in the same people that don’t belong there.”

The Emergencies Act, which became law in 1988, defines a “national emergency” as one of the following: a public welfare emergency, a public order emergency, an international emergency, or a war emergency.

The emergency in question must be “an urgent, temporary and critical situation that seriously endangers the health and safety of Canadians or that seriously threatens the ability of the Government of Canada to preserve the sovereignty, security and territorial integrity of Canada.”

Invoking the Emergencies Act grants the Federal government several powers, including the ability to seize private bank accounts and suspend large transactions.

Deputy Prime Minister Chrystia Freeland said in a press conference earlier this week that the government is broadening “Terrorist Financing” rules to cover crowdfunding platforms and digital assets, like cryptocurrencies.

Horwitz said that cryptos will be difficult to seize.

“That’s not so easy at this moment. If you’re carrying, in your cold wallet, your cryptocurrencies, they don’t have any actions to that,” he said. “This is one of the things that makes cryptos so valuable right now and why you’re starting to see more dominance and more play there is because…if you’re in Ukraine and you want to get out, you can’t walk out with a million dollars of gold but you can walk out with a million dollars on a flashdrive of Bitcoin. So this is a threat that they couldn’t really follow through on.”

For more information on why stocks are still headed for a 50% to 60% correction and why a shortage of food may be on the way, watch the video above.
 

By David Lin

For Kitco News

Time to buy Gold and Silver on the dips

 

David