While the markets evaluated the risk of Russia-Ukraine, the price of gold benefited from safe port charm. And according to MKS PAMP, this geopolitical conflict may have an even more important effect due to the current macro environment in which investors pricked a policy error made by federal reserve. MKS Pamp’s Metal Strategy President Nicky Shiels’ market analysis and estimates Kriptokoin.comWe prepared for readers.
FED’s Policy Errors and Effects on Markets
Nicky Shiels, President of MKS PAMP’s metal strategy, evaluates the rising inflation in the USA and the stance of the Federal Reserve as follows:
Since 1982, the US has the highest inflation and is still technically relaxed. The market assumes that the narrowing is tightened incorrectly, but the Fed simply adds less liquidity.
While inflation in the US is at the highest levels of the last forty years, the markets are worried that the Federal Reserve moves too late and made another ‘policy error’. Nicky Shiels interprets the Fed’s mistakes as follows:
The markets shift from a recent Fed error (early recitation of inflation and temporarily describing inflation) to a new potential Fed error (early recession or uncontrollable inflation in aggressive interest rate hikes).
“The price of gold can increase due to ‘wrong’ reasons and find higher intervals”
Although geopolitical fears are often temporary driving forces for precious metal, the geopolitical situation seems extra for gold, given the exacerbation between Russia and Ukraine. The Head of Strategy explains the current situation as follows:
We have always stated that geopolitics offers better opportunities to reduce gold prices rather than purchasing. However, these headlines 1) This kind of uncertainty around the fed and inflation, 2) General market concern and 3) When it occurs at a time, the price of gold, which is an advertised technical bending point, may increase due to ‘wrong’ reasons and find higher ranges. Higher soles, bottom purchase and wavy markets continue.
Comparison of the effects of the Crimea’s annexation and Ukrainian tension on the gold price
MKS Pamp also compares the reaction of gold to Russia’s annexation in 2014 to the behavior of this time. The MKS notes that gold is a war protection, and that it has an even higher movement potential after approximately $ 80 in the current Russian-Ukraine conflict compared to climbing in 2014. Nicky Shiels compares with some calculations:
The last rise of gold was $ 80 for $ 140 at that time. The $ 80 ‘price increase premium’ is 4/7 of 2014 so far, the entrances are much more inadequate. Only 1/4 of the dimension seen at that time. In general, it is too early for bulls to remove the pompoms. Prices are constructive with this last break/output (3). However, historically, the golden price is behind that they can potentially achieve it.
However, most of the rise of gold last week was due to the increasing risk of inflation by the fact that more investors have chosen a safe port metal to prevent increased price costs. This adds strength to the higher movement triggered as geopolitically in precious metal. The strategist evaluates this situation as follows:
Considering relatively lighter position and strong physical demand, it seems likely to fight gold.
