EDITOR'S NOTE: Over the last week, we saw gold’s highest finish in more than a year. The MarketWatch article below delves into the details concerning gold’s rise in relation to both the ongoing Russia-Ukraine war and the looming rate hikes to which the Fed may approach more aggressively to put a lid on inflation. As Kitco’s Jim Wyckoff says, traders attempting to factor in worst-case scenarios are paying close attention to the Russian invasion, as any major shoe drop can “further destabilize markets.” On the technical front, the money flow indicator is showing a considerable surge, a bullish sign for investors “long” gold.
Gold futures climbed on Wednesday, amid the Russia-Ukraine crisis, which lifted values to the highest finish in more than a year.
Bullion has been enjoying an upswing amid intensifying tensions between Moscow and the West over troop deployments into Donbas regions of Ukraine and growing fears of a full-scale invasion of Kyiv.
“Precious metals continue to shine amid heightened geopolitical risks concerning Ukraine, a struggling global stock market and soaring inflation,” said Fawad Razaqzada, market analyst at ThinkMarkets, in a market update.
Against that backdrop, April gold GCJ22, +0.80% GC00, +0.80% climbed by $3, or 0.2%, to settle at $1,910.40 an ounce. Prices logged the highest most-active contract settlement since Jan. 7, 2021, FactSet data show.
The Russia-Ukraine situation is still “dicey,” as a military mistake by either side could significantly escalate the conflict, said Jim Wyckoff, senior analyst at Kitco.com, in a daily note. “The major question on traders’ and investors’ minds is whether the uncertainty/anxiety factor has peaked, from a markets perspective.”
Wyckoff said traders tend to “factor into market prices a worst-case scenario, only to see that scenario typically not occur,” but in this particular geopolitical situation, “another major ‘shoe could drop,’ such as a full-blown Russia invasion of Ukraine, to further destabilize markets.”
Meanwhile, the Federal Reserve seems determined to lift interest rates aggressively, as early as next month, to combat a surge in inflation. Such monetary policy moves usually serve as a bearish factor for precious metals.
Originally posted on Market Watch.