gold prices fall by $70 and bitcoin prices soar by $3,000. However, all eyes are on the CPI statistic The gold market was trading around daily lows after dropping more than $70 and plunging below $2,000 an ounce. The selloff coincided with a 10% drop in oil prices and big gains in risk assets such as equities and cryptocurrency.
On Wednesday, the commodities’ rise slowed, with losses in oil, platinum, silver, copper, wheat, and maize. The price of West Texas Intermediate oil sank 10% to $110, while Brent crude slid 11% to $114.
gold prices fall by $70 and bitcoin prices soar by $3,000. However, all eyes are on the CPI statistic
“WTI crude is currently 9% down from the trading week’s highs, but the retreat seems premature considering the shorts-term supply disruption risk remains quite high,” said OANDA senior markets analyst Edward Moya. Coordinated efforts to handle the global energy crisis will help reduce some of the tensions we’ve seen, but the duration of the struggle will decide risk appetite. in Ukraine.
Risk assets, on the other hand, have made a comeback. The Dow gained 2.35 percent and the S&P gained 2.79 percent on the day. Bitcoin gained 8%. climbed from $39,000 to over $42,000, following in the footsteps of the U.S. markets.
After hitting fresh record highs of $2,078.80 on Tuesday, gold was unable to maintain its gains. On the Comex, gold futures for April were last trading at $1,990.30, down 2.59 percent on the day.
The precious metal rose in response to a comeback in the risk-on mood on Wall Street, although the rise may be premature given the ongoing crisis in Ukraine.
Due to oversold circumstances, today’s surge was more of a dip-buying opportunity, but this hugely convoluted issue is unlikely to be resolved quickly, as Ukraine is unlikely to move on recognizing Crimea and separatist-held parts as Russian, “Moya said.
The optimism on Wall Street comes after Ukrainian President Volodymyr Zelenskiy said that he had “cooled down” on his country’s membership in NATO. It will be two weeks on Thursday when Russia invades Ukraine.
As markets analyze events in Ukraine and any additional supply shocks, gold, like other commodities, will likely remain a highly volatile commodity, according to Moya.
The price of gold is expected to fluctuate around $2,000 per ounce. If equities in the United States continue to defend the lows reached during the first shock at the start of the war, gold might continue to fall. Between $1,965 and $2,050, gold might establish a trading range “On Wednesday, he said it.
According to DailyFX expert Michael Boutros, a key support level to monitor is $1,922 per ounce. Trade continues bullish until above $1,922 (critical support)-losses should be limited to this level IF Gold is going higher,” he tweeted on Wednesday.
According to Exinity Group chief market analyst Han Tan, gold will continue to rise as long as geopolitical tensions stay high and uncertainty hovers over the global economy.
While inflation shocks may magnify other major central banks’ hawkishness, they should also strengthen gold’s traditional position as an inflation hedge, particularly during worries of stagflation. Tan said that if markets believe there is a greater chance of a global recession, which may be sparked by a major central bank’s policy mistake, this could lead to increased demand for safe-haven assets.
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Keep an eye on the CPI
Aside from the geopolitical implications, there is one key macroeconomic release that markets are closely monitoring. And that’s the CPI statistic from the United States on Thursday.
According to economists, inflation in February has certainly risen but is still far from peaking. According to market consensus, the annual CPI headline figure is expected to rise to 7.9% in February, after reaching a 40-year high of 7.5 percent in January.
The danger is that prices will rise considerably more,” DailyFX chief analyst John Kicklighter said. On the open market, commodities prices have also risen significantly. The increasing pressure for metals and “softs” has moved to the last weeks of February (the measurement period) since energy prices have risen rapidly.
The most recent CPI figures were released exactly one week before the Federal Reserve announced its interest rate decision. Jerome Powell, the chairman of the Federal Reserve, has pledged to back a conventional 25-basis-point rate hike.
Following the most recent round of market volatility and Ukraine uncertainty, the likelihood of a 50bp raise has dropped from as much as 40% to nearly zero as of Friday. That perspective may shift as a result of the CPI update. “Kicklighter” has been added.
Many people are concerned that inflation will continue to rise due to the recent jump in commodity prices. In a webinar on Tuesday, DoubleLine Capital CEO Jeffrey Gundlach predicted that inflation might rise to 10% before peaking this year, pushing the Federal Reserve to become more active.
Some are promoting the idea that, because of the conflict in Ukraine, the Fed will be less active in increasing rates. That is something I completely disagree with,” Gundlach remarked. It depends on where commodities go, but I suspect we’ll be looking at a 10% CPI before we see any respite, says the author.