GOLD, XAU/USD, Crude Oil, US Dollar, AUD, NZD, SEK, EUR/CHF, WHEAT – Talking Points
- Gold prices soared as hedges against uncertainty gained traction
- Commodities across the board are roaring while equities are sinking
- If the Ukraine war rages on, will that further boost XAU/USD?
Gold made an 18-month high as markets reeled on Monday. The implications of a US ban on Russian oil imports ricocheted through commodities, to stocks, to bonds, to currencies.
US Secretary of State Antony Blinken spoke on NBC and said that the US is in discussions with their European allies about placing a ban on all Russian oil imports.
He further hinted that the US might impose a ban on Russian oil even if Europe doesn’t. The economic consequences are still being weighed.
This sent the Brent crude oil futures contract to high of US$ 139.13 bbl and the West Texas Intermediate (WTI) contract to a peak of US$ 130.50 bbl. JPMorgan’s forecast of US$185 a barrel doesn’t look as farfetched as it did last week.
Gold traded above US$ 2,000 an ounce for the first time since August 2020. The US 10-year real yield has fallen over 50 basis points from last month’s high, further boosting bullion prices.
Agricultural commodities also reached for the skies with wheat trading at 14-year highs.
This sent equities south as the consequences of much higher input costs (producer price inflation or PPI) face off against potentially stagnant prices received (consumer price inflation or CPI).
Central banks globally are trying to lower price pressures for consumers. The US Federal Reserve is expected to raise rates by 25 basis points at their Federal Open Market Committee (FOMC) meeting next week.
Hong Kong’s Hang Seng Index (HSI) is at a 6-year low today while Japan’s Nikkei 225 index also went to March 2020 lows. Australia’s ASX 200 was the ‘least bad’ performing Asia-Pacific equity market with its’ commodity sector getting a leg up.
The Euro suffered the most out of G-10 currencies due to the Eurozone’s exposure to Russian oil and gas supplies. EUR/CHF is at 7-year lows and there is speculation that the Swiss National Bank might intervene to steady exchange rate.
In the sessions ahead, all eyes will be out for any developments on further Russian sanctions.
Gold Technical Analysis
Today’s 18-month peak on gold opens up the possibility of a move to test the all-time high of 2,075.14, seen in August 2020.
Before that it will need to clear a resistance level at another previous high of 2,015.65.
Support on the downside could be at the pivot points of 1,965.55 and 1,959.33
Not surprisingly, this move has seen all the short, medium and long-term simple moving average (SMA) turn to positive gradients. This could suggest that bullish momentum may still be in play.
— Written by Daniel McCarthy, Strategist for DailyFX.com
To contact Daniel, use the comments section below or @DanMcCathyFX on Twitter