The gold bulls are knocking on the $2000 per ounce level today as the yellow metal sees moderate gains in early morning action. Spot gold prices are higher by over $10 per ounce in early action as flight to safety and chart buying drive prices higher. Traders and investors share three primary sources of concern currently: The ongoing war in Ukraine, Chinese lockdowns and corporate earnings.
The Russian/Ukrainian war is showing little, if any, signs of slowing down anytime soon. The Russian forces continue to bomb and shell Ukrainian towns and villages, seemingly caring little for who may be present in these bombing targets. Civilian deaths have been high, and with no outside help from the West, more civilians may suffer the same fate if the war continues. The economic effects of the war could continue for years. The World Bank recently cut its global growth forecast from 4.1% to 3.2%, citing challenges from the war in Ukraine.
Investors may pay close attention to yields this week as the benchmark 10-Year Note is yielding almost 2.90%. The rapid rise in yields along with an increasingly hawkish Federal Reserve may keep upside pressure on yields in the months ahead. Although they are not currently inverted, investors will also watch closely for an inversion of 2-year and 10-year yields. Such an inversion could point directly to an upcoming recession and could rattle markets significantly should it occur.
Other outside markets today see crude oil steady around $107 per barrel and the dollar moving higher. The Dollar Index is near the two-year high reached last week, and any significant upside in the currency may prove to be a formidable obstacle to higher gold prices. Some analysts in recent days have suggested the dollar may be the only significant roadblock to much higher gold prices. Should the dollar weaken sharply anytime soon, it could send gold roaring higher, possibly even challenging previous all-time highs in the process.
The crude oil market is also a source of concern. Prices have moved up in recent weeks as commodity prices across the board have seen upside pressure. Oil is also affected, however, by the war in Ukraine. Russia is a major supplier to Europe, for example, of natural gas and other energy products. Should the EU and its allies elect to stop imports of Russian energy, prices could see a rapid and sharp rise higher. Such a price spike could affect the global economy and may force individuals to curb spending in other areas. The effects could be far-reaching and disastrous, putting much additional upside pressure on commodity markets that are already being severely strained.
The bulls remain in control of the daily timeframe. The bulls are looking to produce a close above resistance at the $2000 level. The bears are looking for a decline, first to $1950 and then to $1900 before getting excited. The bulls are pushing today, however, and could see an upside breakout in the coming days