Ed Moya – Market Moves From Ukraine Invasion Continuing To Impact Commodities, Inflation, Cryptos, Gold, And Growth Outlook
Ed Moya, Senior Market Analyst at OANDA, joins us to review the recent market moves off the backs of the geopolitical tensions from the invasion of Ukraine by Russia. We start of discussing how inflation is only being exasperated by the tariffs NATO countries are imposing on Russia, as it is a major producer of commodities, from oil and natural Gas, to cereal grains and soft commodities, to nickel, palladium, and other key metals.
Aside from how these ongoing inflation concerns are going to hamper global growth expectations, we also get into how the motion by NATO countries to remove Russia from the SWIFT banking system, may end up expediting a payment messaging system between Russian and China and other countries with excessive tariffs, and could bring cryptocurrencies in as a viable alternative for countries and their citizens.
Next we pivot over to how gold and silver may could be impacted or play a role as alternatives to working around the SWIFT banking system, but Ed feels gold investors are just going to need to be patient as gold gave up many of its gains on the recent escalation in Ukraine, but has been holding steady and consolidating the recent move higher. We wrap up with Ed outlining that the positive expectations for a reopening trade have faded fast, as inflation is still a going concern, consumers are strapped and starting to buy on credit, and most growth forecasts are slipping for the balance of the year.
Paul, you’re right on—-this move for gold is probably geo-politically influenced and any news suggesting resolution for the Ukraine issue could be a real negative. I feel the lousy response of the majority of PM companies is a warning sign. Anyways, March is upon us and we better see a follow through for gold to make this a legitimate move.
It should be pointed out that Gold was already moving higher since the end of last year (and one could point out has been moving higher since it double-bottomed in March of 2021 at $1673) on the news of inflation continuing to move higher and higher each month, further pressuring the FED to expedite it’s tapering of accommodative bond buying and start hiking rates. Gold has actually been steadily moving up for this entire bull market, starting at the last rate hikes kicking off in December of 2015 when gold put in it’s Major Bottom at $1045.
The recent geopolitical theater has added on $50 bucks since gold had already climbed to $1850, and yes it did cause Gold to spike up briefly to $1976.50 at one point, but things have cooled down some now with the yellow metal closing the month of February over $1900. (at $1900.70). [we’ve heard for months that people have been wanting to see a monthly close at $1900 or greater, and we just saw it today].
In addition, the precious metals have continued to diverge in a stronger manner from the weakening general equities markets, which is something we’ve been wanting to see and is a constructive pattern to see this year. For the last few years there have been many pundits that wanted to see gold, silver, and the PM miners start outperforming the general equities markets and we’ve seen that all year.
One last point that has been made for years on here is that the pattern of “higher lows” has remained intact and that has underpinned the bullish uptrend the entire time. We have yet to go down and make a meaningful lower low (even during the pandemic crash in March of 2020).
Bottom line – sure, gold and the PMs may selloff for a bit, after climbing higher the last few months, but there are few bearish factors for the PMs at present, and conversely a number of bullish factors all stacking up:
1) Pattern of “higher lows” for years remains unbroken = bullish
2) Gold just had a monthly close over $1900 = bullish
3) Gold & Silver have been outperforming the US general equities markets = bullish
4) Gold is above the 233 day EMA, 144 day EMA, and 55 day EMA, and they are sloping up = bullish
5) Gold broke above the downward sloping trendline across the tops from August of 2020 this month = bullish
6) Inflation has consistently climbed month after month for over a year, despite the calls all the way along for it to have topped out = bullish
7) We are a few weeks away from the FED kicking off their rate hiking cycle – (this is up for debate but historically the rate hiking cycles are bullish for Gold)
8) The 10 year cup & handle pattern in Gold looks like it just completed the handle and the upside measured move is far above the recent all-time high of $2089, and closer to $3000+ in the medium to longer term = uber bullish
The point being that even if we see Ukraine resolve tomorrow, sure their may be a little selloff in the metals, but all those underlying factors have been underpinning the PMs for some time, and the geopolitical theater will be fleeting, but hasn’t had that much of an effect on PMs when properly put in context of the larger macroeconomic backdrop.
In the move between Jan. 28 and Feb. 24, GDX gained about 25% while GLD/gold gained about 10%. That’s leverage of 2.5 to 1 which is better than the almost 2 to 1 we had in the June to August run of 2020.
The suboptimal performance of the tiny caps and everything else non-GDX can easily be attributed to the fact that the conventional stock market keeps having rough days while the big turn in the gold sector is not yet considered a done deal by most players. It is unusual for the more speculative plays to take off before silver has fully confirmed gold (as it is doing now). SILJ showed a bullish increase in volume today during the last 90 minutes of trading to go with its improving price action. Take a look at a 30 minute chart to see it clearly.
With the new month starting tomorrow, the important “P” pivot support for silver just moved up 4.2% and for GDX it moved up 8.7%. Based on comments here and on other sites, I think it’s safe to assume that the action of late has bucked off a lot of weak hands.
Silver:
https://stockcharts.com/h-sc/ui?s=%24SILVER&p=D&yr=0&mn=7&dy=0&id=p50352238385
I think the war in The Ukraine will be a protracted one like Pierre Lassonde claims. Putin doesn’t want to totally destroy Ukraine’s infrastructure and allow the terrorists to emerge. We all know what happened in The Middle East. That should allow gold to consolidate at a higher level.
I bought some Dolly Varden this morning but I was totally surprised to see Group Ten drifting lower on the heels of rising Palladium and Platinum prices. What are investors/speculators thinking? DT
You know the old saying what goes up must come down especially when it’s geopolitical.
I’m hoping miners get pop along with gold so I can takes some profits. I would rather see gold go up for right reasons so it stays up and strong.