Gold slid slightly from a key $1,900 level on Friday as hopes for US-Russia talks calmed broader markets somewhat. However, lingering concerns over Ukraine have kept bullion on track for the third week in a row. Analysts’ market comments and price predictions cryptocoin.com compiled for our readers.
Gold price pullback will be short-lived, according to Bob Haberkorn
“The recent development on the Russia-Ukraine situation was positive, causing a slight pullback in gold,” comments Bob Haberkorn, senior market strategist at RJO Futures. The analyst also states that ongoing tensions will continue to support bullion, so the pullback will be short-lived.
US Secretary of State Antony Blinken agreed to meet with Russian Foreign Minister Sergei Lavrov next week, calming investors’ nerves and slowing safe-haven demand. But Russian news agencies reported an explosion in the eastern Ukrainian city of Donetsk. ThinkMarkets analyst Fawad Razaqzada highlights the following in a note:
Investors are seeking protection in safe-haven assets like gold, not only because of the situation in Ukraine and increased stock market volatility, but also because of rising inflationary pressures.
Financial leaders in 20 major economies agreed on Friday that rising inflation and geopolitical risks could threaten a fragile global recovery. Gold is considered a hedge against rising inflation and is often used as a safe store of value in times of political and financial uncertainty.
“Our gold valuation model shows that it is currently undervalued”
The popular view is that rate hikes are bearish for gold. However, ANZ bank strategists state in their report that the comparison of interest rates and the yellow metal shows the opposite:
Since 1970 the correlation has only been around 28% and is not considered significant. When divided into interest rate cycles, gold finished lower only once. In fact, in some periods, it was seen that gold rose 30-40% more.
Stating that gold performs best when inflation rises, interest rates fall and the dollar weakens, strategists make the following assessment:
The rare overlap of these factors makes it difficult to assess the fair value of gold. Our gold valuation model shows that it is currently undervalued. Persistently high inflation and a weak dollar can offset the decline in high interest rates. Combined with safe-haven demand caused by geopolitical tensions, gold could hold up well.
Christopher Lewis: If it can break above $1,920, it could go much higher
Gold markets had an interesting week. Because it initially gapped higher based on Russia/Ukraine fears, it pulled back to fill the gap and then surged above the $1,880 level. By doing this, market analyst Christopher Lewis notes that gold appears to be breaking through resistance, but pulling back a bit on Friday. The analyst draws attention to the following level:
This makes sense, because frankly it was a bit parabolic on the daily chart. If it can climb above the $1,920 level, it could likely climb higher. But this looks at the Russia/Ukraine issue, at least in the short term.
“Inflation is of course a longer-term concern, so we’ll probably continue to pay attention to that as well,” the analyst said, so he recommends keeping that in mind. According to the analyst, gold does offer some protection against inflation, but that doesn’t necessarily mean it has to go straight. The analyst makes the following assessments:
Once things calm down on the Ukrainian border, this will likely end the higher volatility in the short term. However, if the Russians make progress over the weekend, it will almost certainly cause the gold market to soar quite quickly.
Christopher Lewis adds: All things being equal, this is a very noisy market and I think it will continue to be so. Obviously, if you’ve been buying gold for a while, you’re watching your money do nothing. Yes, it tends to act pretty well in times of anxiety, but as soon as things calm down, there will probably be better ways to fight inflation.
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