The Ukraine-Russia situation is deadlocked; a multi-faceted risk analysis of gold's price trend
On Friday, February 18, during the Asian market close, spot gold prices saw a slight rebound, trading near $1892 per ounce. Prior to this, gold prices had briefly fallen below $1890 per ounce. Gold appears to have ended its two-day upward trend, but is still on track to record gains for the third consecutive week. Market participants are now awaiting the release of US existing home sales data later in the North American morning session. This, along with US Treasury yields, will influence dollar price dynamics and provide some impetus for commodities. However, the focus will remain on headlines from Russia and Ukraine, which will continue to play a key role in driving demand for traditional safe-haven assets, including gold.
Time:
2022-02-19 11:16
On Friday, February 18, during the late Asian trading session, spot gold saw a slight short-term rebound, trading near $1892 per ounce, after the price of gold briefly fell below $1890 per ounce. Gold appears to be ending its two-day upward trend, but is still on track for a third consecutive week of gains. Market participants are now awaiting the release of US existing home sales data later in the North American morning session. This, along with US Treasury yields, will influence dollar price dynamics and provide some impetus for commodities. However, the focus will remain on the headlines from Russia and Ukraine, which will continue to play a key role in driving demand for traditional safe-haven assets, including gold.
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Here's an explanation of the Forex Maverick's understanding and expectations of the Russia-Ukraine situation, to help everyone understand the current trading environment's risks and take appropriate actions and defensive measures:
Who wants a war between Russia and Ukraine the most?
Undoubtedly, the United States. With high inflation in the US, interest rate hikes are inevitable in the future. However, if a conflict erupts between Russia and Ukraine, it will undoubtedly increase the return flow of European assets to the US dollar, complementing interest rate hikes and even enhancing the effects of US interest rate hikes, allowing the US to profit. This explains why the US previously claimed that Russia was about to invade Ukraine and created hype around the event, seemingly hoping for chaos.
Who wants a war the least?
Russia least wants a war. If it really wanted to fight, the military exercises and flexing of muscles would have been omitted. But even without a war, Russia needs to maintain a dominant position in public opinion. The US previously claimed that Russia would launch an invasion of Ukraine on the 16th, but on the 15th, Russia withdrew its troops, effectively slapping the US in the face and changing the direction of public opinion. Even if a war were to happen in the future, it would appear to be unavoidable, not initiated by Russia.
Who is the most reckless?
Ukraine! A crying child gets the candy. Currently, although relations with Russia have been tense, they haven't completely broken down, as that would not be beneficial to Ukraine. Calling Ukraine reckless is an overstatement, as yesterday's events show Ukraine's ambiguous statements. The reason is simple: initiating hostilities may be at the behest of the US, and it's also a show of face to the US, especially after being slapped in the face by Russia on the 15th. Ukraine's ambiguous statements are an attempt to avoid completely angering Russia, as if Russia is angered, Ukraine will ultimately suffer.
In summary, the US hopes for a war and wants it to happen soon, but the decision on whether or not it will happen ultimately rests with Russia. The likelihood of an actual war is not very high, but the ongoing tension will keep market nerves on edge, increasing uncertainty and risk. Therefore, appropriate risk mitigation is necessary; avoid blindly speculating on fundamental events to make trades.
Gold Price Analysis
Regarding gold, yesterday's price action was remarkable, with prices breaking through November's high after two days of consolidation and piercing the $1900 mark. On the daily chart, the Bollinger Bands are expanding upwards. After a Tuesday pullback, prices have risen continuously, resulting in a breakout. The short-term trend is bullish. While there was a slight pullback at the open today, after breaking through the previous high, resistance has become support. Today, we need to watch whether the $1880 level can hold. On the 4-hour chart, the Bollinger Bands are expanding, and prices have seen a surge after continuous consolidation near the middle band. Although there is a temporary pullback, given the breakout, prices could move towards the high of June last year, around $1916. The intraday trading strategy is to buy on dips. However, it's worth noting that geopolitical factors are uncertain, leading to volatile price fluctuations. Therefore, the Russia-Ukraine situation still presents significant uncertainty and risk. We cannot blindly follow current fundamental news to chase bullish trends, nor can we predict Russia's next move, whether it will continue to inject safe-haven buying momentum into gold or downplay it to suppress safe-haven buying.
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Although gold prices rose this week, market volatility has clearly increased. While the US-UK agreement is symbolic, its content is limited and insufficient to alleviate concerns about a global economic slowdown. Therefore, gold prices will continue to fluctuate between safe havens and policy signals, closely monitoring the Federal Reserve's interest rate expectations and global trade sentiment.