By Dr. Renisha Chainani, Head- Research, Augmont – Gold for all
The Russia-Ukraine war which started on February 22, 2022, has completed more than 1000 days, and still, it is impacting the bullion market to a great extent. Gold and Silver saw safe-haven flows last week, and rising tensions between Russia and Ukraine caused renewed unease in the markets last week.
Last week, gold posted the strongest week in a year by rising 5% ($150) as Russian President Vladimir Putin signed an amendment to Russian nuclear policy that permits Russia to deploy nuclear weapons to retaliate against conventional strikes that were backed by a nuclear state. The modification was a clear reaction to the US permitting Ukraine to launch strikes within Russian territory using long-range ATACMS missiles.
Russia launched a series of missiles, including a new intermediate-range ballistic missile, toward the city of Dnipro in eastern Ukraine on Thursday after Ukraine quickly carried out its first missile strikes on Russia using American and British weapons beginning Tuesday. The events of the past week have been referred to by both sides as an escalation of the conflict, which has now lasted more than 1000 days. In the last 1000 days, Gold has gained over 55% as safe-haven buying has triggered investors on every dip.
I now anticipate impending buying exhaustion this week in precious metals. Demand for safe-haven assets linked to Russia’s ballistic missile launch has impacted tapes boosting prices more than it would normally, but this trend is probably going to have to reverse soon. An ‘overly easy’ policy stance is no longer likely to result from the Fed’s projected path, indicating that hedge fund interest is unlikely to return to high levels.
For another week, the US dollar held its extremely bullish position, hitting levels not seen in more than two years. A re-evaluation of the possible ramifications of Donald Trump’s second term in power has been the driving force for this ongoing surge. As US rates gradually increased across the curve, the US Dollar Index continued to rise and broke above the 108 barrier for the first time since early November 2022. The CME FedWatch Tool indicates that traders currently give a 25-basis point rate drop in December a 55% chance. In the meantime, market players will evaluate the outlook for US interest rates this week by carefully examining the minutes of the Federal Reserve’s November meeting, PCE inflation data, and other significant US economic indicators.
Gold Daily Chart
As discussed in the last Weekly Blog “Renewed geopolitical risk expected to overcast Trumponomics”, gold prices continued their northward journey and indeed achieved the target of Rs 75000 and Rs 77000 last week.
We are likely to see profit-booking and consolidation in gold prices this week as prices have run up too much too far. Important support levels are 50 DMA around $2650 (~Rs 75500). Gold is in an uptrend until the prices are trading above $2550 (~ Rs 73700). We are likely to see dip-buying until these levels are sustained.
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