US Preview: Gold, Oil and Equities Respond to Sanctions and Russian Advances
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Gold, Oil and Equity News and Analysis:
- Sanctions imposed on Russia do nothing to halt further Russian military advances
- Gold and Oil consolidate after yesterday’s massive rise and immediate drop in prices
- History shows us that U.S. equity markets could see upside potential in the coming weeks despite recent decline
Price Action and Sanctions Swing Back and Forth
We continue our coverage on major markets as they respond to the unfolding invasion of Ukraine. Yesterday, a wave of sanctions were imposed on Russia by President Biden while on the European front, talks of a third round of sanctions are in the works, according to a German government official. Russia has issued a statement that it too intends on issuing sanctions aimed at hurting the west. Many of the major tradable assets have clawed back, or significantly recovered from yesterday’s massive moves as the immediate effect of recent sanctions are evaluated.
Reports surrounding the conflict thus far:
- Biden institutes sanctions on Russia including a clamp down on tech exports to the region and restrictions on 5 major Russian banks and certain individuals
- Deputy Ukrainian Defense Minister: Russian military may reach areas near Kiev today
- UK Defense Minister Wallace: Russia has not taken any major objectives
- Russian forces take over control of Chernobyl plant, higher radiation levels recorded but “not critical”
- Ukrainian President Zelenskiy considers himself the number one target as he explains Russia intends on destroying Ukraine politically
Strategist, Nick Cawley commented on recent developments, “wild price action seen in the gold space on Thursday has calmed today with the precious metal sitting quietly in a very small range so far.”
Nick continues, “Gold hit the mid-$1970s/oz yesterday on news that Russia had invaded Ukraine but then turned sharply lower and negative on the day in late-European trade as a wave of risk-on sentiment swept over the markets. With no clear driver identified behind this move, gold will remain on edge over the coming days and weeks.
The war certainly complicates the job of major central bankers as they weigh measures to control inflation alongside negatively affected future growth estimates likely to result from the conflict.”
Take a look at Nick’s full article identifying key chart levels for gold.
Gold Daily Price Chart
Source: IG, prepared by Nick Cawley using ProRealTime
US PCE Inflation Data Brings Attention Back to the Economic Calendar Momentarily
Later today we have the Fed’s favored inflation reading, Core PCE, released at 09:00 EST and this is expected to show that inflation continues to move higher, ratcheting up the pressure on the Fed to hike rates hard and fast. The volatile situation in Eastern Europe however may stimy the Fed’s plans, in the short-term at least, leaving gold with the room to move higher.
Customize and filter live economic data via our DaliyFX economic calendar
Analyst, Warren Venketas, “Brent crude breached the psychological $100/barrel mark yesterday following the Russian invasion into Ukraine. Expectedly, markets reacted accordingly and drive energy prices up including European natural gas (TTF). The potential disruption to crude oil supply from one of the world’s largest producers (in an already tight market) gave added impetus to the upside move.”
However, oil, similarly to gold, witnessed a relatively smaller pullback but softer prices nonetheless as news of the US administration working with the IEA to potentially release strategic oil reserves.
Crude Oil Daily Chart
Source: IG, prepared by Warren Venketas
A Short-Term Reprieve in Oil Prices?
From a U.S. perspective, tapping into SPR (Strategic Petroleum Reserves) is on the table according to the Biden administration however, this may only be a short-term solution for the consumer.
Take a look at warren’s full article for more analysis and key technical levels.
A lot has been said recently regarding global equities and the upcoming rate hikes anticipated by central banks. Much of that has centered around lower economic growth and lower valuation forecasts but also lower observed equity valuations as a result of rate hiking cycles.
However, Strategist, Justin McQueen takes a look at the historical performance of the S&P 500 Index just before and weeks after previous invasions which reveals interesting results for equity bulls.
Justin McQueen, “As shown below, geopolitical events have often been short term in nature, with markets posting a full recovery in the subsequent 4-5 weeks. In fact, invasions of the past have tended to present an opportunity for bulls.”
S&P 500 Performance During Geopolitical Risk Events
‘0’ = Date of Invasion/US Intervention
Source: Refinitiv, prepared by Justin McQueen
Take a look at Justin’s full article for further equity analysis and notable moves in the FX space
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--- Written by Richard Snow for DailyFX.com
Contact and follow Richard on Twitter: @RichardSnowFX
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.