Corrective Pullback As Expected
The gold market is lower today in mid-morning action as longs book some profits following recent strong gains. Despite being down by over $10 per ounce earlier in the session, the gold market is now down just $3 per ounce. Some bargain hunting and risk buying ahead of the weekend are not unexpected, and the market could even find its way into the green before the day session concludes because of this. Prices are down, although they are holding above the $1950 area in a good sign for the bulls.
Nothing much has changed throughout the trading week in recent days. The war in Ukraine rages on, unfortunately, and people are now left wondering what Putin may do or try next. The invasion of Ukraine by Russian troops has not gone according to plan, and the conflict could extend for a significant period of time if left as is. Of course, Putin could decide to use even deadlier weapons. Nuclear weapons, for example, would be a major escalation in the war that could bring other global forces into the conflict. Worries over nuclear issues have already begun to increase as Russian troops now hold Chernobyl, site of the 1986 nuclear disaster. Power to the plant has reportedly been cut, restored and now cut again. It is unclear how long radiation may be contained with no power, although it has been said that there is currently plenty of water to keep the fuel cool and from overheating.
After meeting with NATO and EU leaders this week, it is reported that President Biden will announce a new pact with the European Commission to boost supplies of liquified petroleum gas. This move could mean that a boycott of Russian energy products has been decided on or may be in the plans ahead. Biden has also called for the removal of Russia from the G-20 group of nations.
The lack of an easy victory in Ukraine combined with the slaughter of innocent civilians may have humiliated Putin on the world stage. This could make him more dangerous than ever, and no one knows for sure what his next steps may be. The uncertainty surrounding Russia and Ukraine may keep risk appetite depressed for some time and could keep demand for perceived safe havens such as gold robust in the months ahead. This, along with the rampant inflation being seen across the globe, could keep the gold market on the offensive. The yellow metal is approaching the $2000 level, an area viewed by some analysts as key resistance. If the gold market is able to produce a close above this level, more buyers could be drawn into the market and prices could potentially skyrocket.
The bears will keep looking for a decline to produce a close first below the $1900 level and then $1850 before getting overly excited. Market action between $1900 and $2000 may simply be noise and nothing of substance. A breakdown or breakout above or below these levels could, however, be indicative of the market’s underlying intentions.