Gold's gain on Russia/Ukraine
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
■ Query: Were we not having the "on again off again" RU/UKR kirmih -- (the tateide Preident having jut tactfully tated the invaion "will" occur) -- where would Gold be priced today? To be ure, it ettled both yeterday a well a on Thurday at 1901. Prior to that, the lat time Gold ettled above 1900 wa on 10 June 2021, ince when through thi pat Wedneday (174 trading day) the average daily cloing price of Gold had been 1799.
■ Repone: Baed on Gold' "terrible technical" (ee our 29 January miive) -- combined with general price fallout typically in tandem during prior negative linear regreion trend rotation that uggeted a run down to 1754 (ee our 05 February miive) -- a further embellihed in anticipating the uual pot-geo-political price decent (ee our 12 February miive), our bet "guetimate" i we'd intead find Gold priced today in the upper 1700. (After all, a you'll recall, price had been reiding at 1780 in eemingly infinite perpetuity).
■ Regardle: the market i never wrong: thu Gold 1901 'ti. Period. 'Coure, our rationale really i rather daft given the above Gold coreboard valuation today of 4134. Gold' gain on Ruia/Ukraine notwithtanding, price i mile below where it "ought" be.
Jut thi pat 04 February, Gold printed at 1792 before reaching Friday' high of 1905: that' +6.3% in a mere 11 trading day. Like percentage gain have occurred (on a mutually-excluive bai) three other time from a year ago-to-date; thu a +6.3% burt i not that unuual.
Further, we wonder
But for the preent, that leave the balance of the oldter, hedgie and overeign, all of whom in magnificent herd tyle have uddenly been buying Gold becaue they're "uppoed to" when geo-politically it all goe wrong. Hopefully the tateide Preident hall oon tactfully revere 180° by tating the invaion "will not" occur, for which diplomatic ucce can be claimed a week Tueday during the tate of the Union nooze, (along with having cured COVID). Come then -- hould hitory repeat -- we'll expect to ee Gold again bumbling about in the upper 1700.
"o you're routing for Gold to actually go
Not routing, quire, rather a noted "expecting" Gold to return from whence it came, imply becaue that' what alway happen when the geo-politic come off the boil.
And yet a we turn to Gold' weekly bar, our forecat high for thi year at 2254 (at upper right) remain intact:
To be ure, 2254 i till a long row from here to hoe. Ye, there are a good 218 trading day remaining in 2022. But to gain +18.6% (from today' 1901 to 2254) in that time tint can be conidered a challenge, epecially given the broader ideway track of price. till, Gold increae of +18.6% within 218 day did occur in 2016, 2019 and 2020. And yet per the above graphic acro the pat year, the price of Gold ha tayed diabolically talled even in the face of rampant currency debaement. "Oh, all that debaement i already priced into Gold", they ay. "Oh, who really want it if it' not tranactable", they ay. "Oh, it' a digital world today and with crypto there' nothing to weigh", they ay. "*Poof* ... o where did it jut go?" we ay.
The good new i: Gold' two-week treak ha righted the "terrible technical" uch that after the RU/UKR kirmih, price perhap han't uccumb to our "expectation". And to maintain integrity in having poted for the pat two miive what had been eentially negative near-term regreion trend for both Gold (below left) and ilver (below right), here' the updated view acro the pat 21 trading day (one month) for the two, their repective grey regreion trendline now in acent, albeit the white metal han't received a much interet a ha the yellow metal:
Aiding Gold' caue a well are the Federal Reerve Follie. "All the other except for Lagarde have already raied, o we're gonna raie three time." ... "No wait, were gonna raie even time!" ... "Oooh! And let' raie by 50 intead of 25!!" Thi i really gonna play out great a we tagflate, eh?
Yet, the truggling Economic Barometer actually put in a poitive week in accounting for 17 incoming metric. Notable improvement were recorded for Retail ale, Indutrial Production and Capacity Utilization, Exiting Home ale and Building Permit for new one, plu the New York tate Empire Index. But inflation ramped up at the wholeale level per the Producer Price Index a well a for Import Price. Houing tart lowed a did the National Aociation of Homebuilder Index, Buine Inventorie backed up, the Philly Fed Index fell, and (of no urprie to you Econ Baro follower) The Conference Board' Leading [lagging] Economic Index for January hrank.
'Coure, in the midt of it all the &P 500 i reuming it tank. Why even Jame "Bullih" Bullard i calling for rate hike in double-time (which for you WetPalmBeacher down there mean in leap of +0.50 bai point veru the claic +0.25 bai point move ... are you till owing thoe variable rate loan and credit card?) The t. Loui FedPrez went on to ay in an interview thi pat Monday that "our credibility i on the line here". Really? (Who knew...)
We know for the econd week running the ignificant price increae made by the preciou metal in their 10-day Market Profile. Here i the fortnight' volume per price point repectively for Gold on the left and for ilver on the right, the underlying upportive trade price a labeled.
A well, let' examine the preciou metal' Market Magnet, (which we don't often diplay in The Gold Update, but are a maintay of the webite). The Magnet i the volume weighted-average price compiled from the entirety of the Profile, and i updated daily. At preent for Gold (lower left) 'ti 1855 and for ilver (lower right) 'ti 23.40. The graphic' key for each market i the underlying ocillator panel: that give u the actual trading deviation from the magnet, to which per it nameake, price alway "nap back". And a you clearly can ee, Gold at preent appear an extreme 46 point "high"; ilver' ditance of 0.53 i not nearly a dramatic given her not getting the bid a much a Gold during the RU/UKR kirmih, (which we hope wiftly come to a cooler-head finih):
We'll wrap it here with thi logitical head-up: thee next few week we'll be writing "in motion" whilt attempting to urvive a culturally war-torn region. Computer (but hopefully not brain) capacity hall be a bit le and the timing of the daily webite update and commentary hall differ from the norm. Nonethele, The Gold Update ought maintain aturday form!