The gold bulls are still in firm control of the market as prices rose Monday to kick off the new trading week. The yellow metal rose today on stronger crude oil prices as well as ongoing worries over inflation. The ongoing war in Ukraine between Russia and Ukraine continues on, and Russia’s crimes against civilians are becoming increasingly apparent.
Ongoing Russian aggression could force the U.S. and its allies to implement even more sanctions against Russia. These could include bans on energy exports from Russia, which has the potential to send crude oil and natural gas prices sharply higher. Despite the possibility of additional sanctions against Russia, the markets have seemingly gotten used to the war and there has been little to no fresh developments in recent weeks. This has given investors time to focus their attention on other major issues such as inflation and its potential effects on the global economy. Price inflation has shown in the past to be bullish for precious metals, and this time around may prove to be no different.
Crude oil traded at over $101 per barrel today in price action that was significantly higher. The stronger crude oil market comes at an already bad time for investors and markets. Stronger crude oil prices may not only erode the purchasing power of the average household, but may also lift commodities higher across the board. This could make current inflation somewhat self-sustaining while it pinches the wallets of both Americans and those abroad. Recent inversion in the yield curve may be pointing to an incoming recession already, and continuing price pressures may only fuel further concerns over a major economic slowdown.
Despite the worries over a slowdown and possible recession, stocks have maintained strength in recent weeks. The equity markets are in the midst of near-term uptrends, and despite the threat of rates rising sharply in the months ahead, have maintained their appeal in recent weeks. Of course, the demand for equities could abate and do so quickly if the war takes a turn for the worse or if the Fed elects to take some form of stronger or surprise action to combat inflation. For the time being, however, stocks may remain a place to go for investors looking to put capital to work.
The gold market is still in a good place as well, and could continue to trend higher in the m months ahead. Price action recently has become choppy and irrelevant. The bulls will need to take out last week’s highs around $1967 to attract more momentum buyers. The bears will look for a decline to produce a close below the March lows around $1888. From there they will target the $1850 zone as their next primary goal.
Currently in no man’s land, price action could see more time in between these areas before making a sustainable move up or down. Whichever way the market goes may be sustained for a period of time. If the bulls move the market higher, new all-time highs could be seen shortly thereafter.