It Is A Win-Win For Gold

 US Fed’s Powell was relatively calm and said that he is not very sure how badly this war is going to hurt the US economy, but there is a surety of one thing - rising commodity prices. Hence, he said March 0.25% hike should be appropriate. Now, the Fed’s May and June policy could also see a similar 0.25% rate hike, according to Fed-Fund-Meter.

We all know any rate hike usually weighs down on gold. But strangely, gold has been resilient in January and early February. The reason behind this robustness was the geopolitical stress of the Russia/Ukraine situation, and this may continue to underpin moves higher if the conflict worsens or sanctions don’t have the desired effect, according to the largest bullion dealers in India.

Gold price extended its range play around the $1,930 level for the third consecutive day, reversing a part of Wednesday’s sell-off. Russian bond and currency are getting into junk and become worthless very fast, yesterday late night came with some best stance from Russian Admin, and they are seemingly calm and readying even for a ceasefire. It is quite possible that sooner or later, a puppet president will be appointed in Ukraine. On the other hand, crude is playing havoc as it reached nearly $115. Other oil-importing countries like India and China will be severely affected if crude sustains these high bands, leading the gold and silver will see a good ripple.

Soaring oil prices, a fallout of the Russia-Ukraine crisis, have refuelled stagflation concerns worldwide, reviving gold’s demand as a haven. Meanwhile, the US dollar continues to hold fort amid ongoing strength in the Treasury yields due to the hawkish Fed Chair Jerome Powell’s testimony. Besides looking for a store of value in times of heightened market stress, we believe many investors see the coming rate hiking cycle as extremely risky given the abnormal macroeconomic backdrop.

The next direction in gold price hinges on the outcome of round two of the Russia-Ukraine ‘peace talks’ while the US economic data will continue to play second fiddle. Ring times of market turmoil, investors turn to gold given its perceived haven status, much to the happiness of the largest bullion dealers in India. As Russian troops invaded Ukraine on 24 February, the yellow metal reached $1,974/oz, the highest it has been since September 2020, taking the gold dealers in India by a surprise. However, even before the situation escalated, we were already seeing signs that institutional demand for gold as a portfolio hedging instrument was turning positive.

Demand for gold as a store of value is climbing, as investors confront soaring inflation and the economic uncertainties caused by Russia’s invasion of Ukraine. Gold spot prices have rallied 6.3% year to date to $1,945.30 per ounce on Wednesday. The current uncertainties suggest that institutions are likely to continue to give more consideration to portfolio diversifiers such as gold, as other choices look less appealing, bringing lots of wealth for the gold dealers in India. So, one potential scenario is a spurt towards those all-time highs over the next two weeks before the gravity effect of higher interest rates starts to pull gold prices down again. We think this will continue through 2022 regardless of how the geopolitical situation evolves.

Geographical Tensions Influence Gold

 A great trick to investing in RSBL gold and silver has become apparent of late. Having or expressing views that are not entirely consistent with the policies and agenda of the Government, the realization that this is bound to happen is already turning into sharp gains in the precious metals sector, which is set to continue and accelerate.

Of course, at the moment the safest form of investment is investing in physical gold and silver, but if they go up then gold and silver stocks will also rise, and we are looking at large gold stocks and bullion dealers in India that pay good dividends like Barrick Gold and Newmont Corp. Close higher on Strong Volume in such a way that they will not give back their profit.

On the latest 4-year chart of the yellow metal, we can see that it is already starting to exit the large triangular consolidation pattern it formed after its strong uptrend from mid-2018 to mid-2020. This correction was normal, and it has put RSBL gold in a very good position to begin its next major uptrend, which will be driven by a combination of rising inflation. As noted above, declining confidence in other forms of investment. At the top of this chart, we see a continued strong uptrend in the accumulation line, which is already making new highs, which certainly bodes well for gold strengthening in the coming months.

Over the last three weeks, gold has made consistent gains with minor corrections for the period the Federal Reserve is planning to hike interest rates as tapering continues. Even though gold is almost on the verge of moving towards the 2020 high of above $2000, the precious metals' upward trend has been dampened by the most influential factors - inflation and expected Federal reserve tightening. As per the bullion dealers in India, Gold prices edged lower in volatile trade on Monday as a possible summit between the U.S. and Russian presidents to discuss Ukraine encouraged risk sentiment and nudged investors away from safe-haven assets.

U.S. President Joe Biden and Russian President Vladimir Putin have agreed in principle to a summit over Ukraine. The French leader Macron said on Monday, offering a possible way out of one of the most dangerous European crises in decades, lifting risk sentiment across the major markets.

The geographical border tensions will be the key in determining whether fears over Ukraine can outweigh the encouraging data on the economic front as well as the likelihood of a series of interest rate hikes this year by central banks.

This possible invasion of Ukraine by Russia has highly impacted most assets across all classes. However, RSBL gold’s gains come ahead of the expected summit between the U.S. and Russian presidents aiming to discuss and find a solution to the Ukraine issue. If the summit finds a solution, it might dampen the appeal of gold.