Gold futures closed higher on Monday as escalating international tensions and a decline in risk assets bolstered buying of precious metals, which is perceived as a haven. Analysts’ market assessments and forecasts cryptocoin.com compiled for our readers.
According to Adrian Ash, gold is clearly in demand
“Gold is clearly in demand as portfolio insurance,” commented Adrian Ash, director of research at BullionVault, with the Nasdaq Composite Index COMP, down nearly 15% from November. “Geopolitics is on the front burner of the market right now, which is causing some concern among traders and investors,” said Jim Wyckoff, senior analyst at Kitco, in a daily note, adding:
Despite Western efforts to deter Russian President Vladimir Putin by threatening sanctions, Russia appears poised to invade Ukraine.
The gold move comes ahead of the Federal Reserve’s meeting on Tuesday and Wednesday to set the framework for tightening monetary policy to combat mounting inflation pressures. Expectations are that the Fed will lay the groundwork for this week to raise interest rates, which currently range from 0% to 0.25%, up to three times in 2022 to rein in inflation. Adrian Ash from BullionVault talks about the following in a statement:
Rising interest rates typically give gold a headwind. But the risk of the Fed making a mistake, combined with the political impossibility of bailing out stock investors with cheap money, makes the situation worse.
Ricardo Evangelista: This assumption seems supportive for yellow metal
High valuations in stocks and uncertainty about the effectiveness of the central bank’s anti-inflation tactics also significantly reduce risk appetite. Ricardo Evangelista, senior analyst at ActivTrades, notes in a daily research note that gold prices are rising as risk aversion continues to rise among investors.
But Ricardo Evangelista says the Fed meeting poses more downside risk to gold buyers, which could at least limit any significant rally despite the bullish backdrop for precious commodities. The analyst interprets the effect of the Fed’s stance on the markets as follows:
With inflation continuing to cause concern, investors are looking forward to this week’s Fed meeting with some trepidation, fearing a more hawkish trend from the US central bank. If the Fed’s falconry is confirmed, it’s likely to create more downside for risk-related assets. This assumption looks supportive for gold, but it also supports the US dollar, and the inverted correlation between the two assets could limit further gold gains as risk aversion gains traction in the markets.
Data released Monday from IHS Markit showed the services-focused companies index fell from 57.6 in the last month of 2021 to an 18-month low of 50.9, as gold prices added to their earlier gains before retracing that rise. .
“More gains for gold may be in the pipeline”
Open interest in gold futures markets continued its uptrend after Friday’s pullback, increasing by nearly 35.5k contracts on Monday, according to preliminary data from CME Group. Along the same lines, volume has increased by nearly 54,000 contracts after three consecutive days of declines.
Market analyst Pablo Piovano says gold prices posted good gains on Monday amid rising open interest and volume, an indication that more gains may be in the pipeline in the very near term. However, the next major hurdle for the precious metal remains at recent highs around $1,850.
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