Gold holds steady

Author: Mr. Amar – Technical Analyst

The gold price was recovered because demand for Safe-haven assets remained strong. Geopolitics remains the key focus for investors as financial markets process the fallout from this weekend’s events, which saw the US and EU, along with other western nations, remove select Russian banks from SWIFT while simultaneously freezing some central bank assets in Russia. Russia’s continued attack on Ukraine weighed on the US and European equities and risk and bond yields. Investors wrestle with uncertainty and bank stocks tumble after heavy Western sanctions against Russia as it continues its invasion of Ukraine.

It is also expected that the purchase of physical gold will increase. The Russian central banks said it would resume its gold purchases after a two-year pause. According to TD Securities, Russia held nearly up to 2300 tons of gold worth $140 billion for their reserves. This gold, in turn, could theoretically be used to bypass SWIFT sanctions, but it’s unclear how immediate that route will be effective. Eventually, these sanctions will eliminate site trading and restrict trading with most counterparties. So, the gold would have to be physically shipped to a destination willing to buy it, suggesting some sort of war chest rebate and blurring the impact on global gold prices.

Based on chartist’s predictions, the evidence continues to support their view that CTA trend followers may have bought the top in gold. If a sustainable offer may appear, it depends on the impact of this conflict on the decision-making of the Fed. Finally, the event is stagflationary globally, but the impact on US growth is milder outside the inflation channel, increasing uncertainty about the Fed’s role in the response.