Gold Weekly Review: Geopolitical concerns sounded the horn of the bulls, the minutes of the meeting assisted, and the weekly gold price rose sharply

In the past week, spot gold extended its rally, reaching a maximum of $1902.47/oz, a new high since June 2021, closing at $1898.43/oz, a weekly increase of 2.13%, the third consecutive weekly rise, mainly due to the US insistence that Russia will invade Ukraine and promote the influx of safe-haven funds into the gold market; on the other hand, the Fed meeting minutes are less hawkish than market expectations, which also partially dispels the scruples of gold bulls.

The survey shows that the vast majority of market analysts and retail investors continue to be optimistic about the future of gold in the short term.

The United States "bites to death" Russia will invade Ukraine

Although the Russian side insisted that it would not invade Ukraine, and the Ukrainian side was skeptical of Russia's invasion of Ukraine, THE US Secretary of State Blinken and US President Biden have always insisted that Russia will invade Ukraine, which has made investors' worries lingering, and the global stock market has generally been frustrated, providing safe-haven buying support for gold prices.

On February 14, local time, US Secretary of State Blinken announced that he had ordered the closure of the U.S. Embassy in Kiev in Ukraine and would "temporarily" transfer the small number of diplomats remaining in Kiev to the western Ukrainian city of Lviv. Blinken called on U.S. citizens in Ukraine to leave the country as soon as possible. Australia, Japan, South Korea and other countries have also called on their citizens to leave Ukraine.

This helped the gold price rise to around 1780.

However, on Tuesday (February 15), Russia announced that some troops would withdraw from the Ukrainian border. Market fears cooled rapidly, with gold prices falling back to around $1845 an ounce. But soon, amid the various "shouts" of US Secretary of State Blinken and President Biden, gold prices regained their momentum and broke the 1900 mark at one point.

Bart Melek, a commodities strategist at TD Securities, and others said in the research report that the rise in The Russian risk premium has pushed gold prices higher since early February.

For Moscow's announcement that Russian troops began to withdraw from the border area near Ukraine after military exercises, US President Biden responded to this on the 15th local time, claiming that the US side "has not yet verified" this information. During a brief appearance at the White House, Biden continued to insist that a Russian "invasion" of Ukraine could still happen and said Americans should follow his previous orders to leave the country. He also claimed that about 150,000 Russian soldiers continued to "encircle Ukraine," but did not provide any evidence to prove the figure he cited.

The United States and NATO said on Wednesday (Feb. 16) that Russia was still massing troops near Ukraine on Wednesday, despite insisting it was withdrawing and questioning Russian President Vladimir Putin's willingness to negotiate a solution to the crisis.

White House press secretary Psaki said the door to diplomatic efforts with Russia remained open, but reiterated concern that there could be "false flag" operations and disinformation before Russia launched an attack.

German government spokesman Steffen Hebestreit said on Wednesday that German Chancellor Olaf Scholz and U.S. President Joe Biden agreed that the situation in Ukraine must be assessed as "extremely serious" as there is still a risk of further Russian military aggression.

The shelling in Ukraine on Thursday reignited fears of an imminent Russian invasion, with U.S. President Joe Biden saying Russia was looking for excuses for a possible attack. Russia expelled a U.S. and said it was in response to the U.S. expulsion of a senior Russian official in Washington.

Speaking to reporters at the White House on Thursday (Feb. 17), Biden said, "We have reason to believe that they are conducting a 'pseudo-flag' operation in order to have an excuse to invade." Every indication we have is that they are ready to enter Ukraine and attack it. The 'false flag' operation refers to the operation of planting stolen goods, but also the operation of grafting.

He ordered Secretary of State Blinken to change travel plans at the last minute, addressing a U.N. Security Council meeting at which he outlined what pretexts Russia might concoct.

"It could be a fabricated so-called terrorist bomb attack inside Russia, fabricated discoveries of mass graves, drone attacks on civilians, or fake or even real chemical weapons attacks, which Russia can describe as ethnic cleansing, or genocide," Blinken said.

That directly helped gold hit a weekly high of $1902.47 an ounce on Thursday. However, after the US secretary of state agreed to meet with the Russian foreign minister later next week, market fears eased somewhat, and gold prices rose slightly on Friday (February 18) and fell into a shock.

As the U.S. and Russia meet next week, traders assess Russian-Ukrainian tensions.

"We're seeing gold extending this kind of intrusive trade," said Kyle Rodda, an analyst at IG Markets, "and the next technical level to watch is around $1920, so there's definitely a technical basis for gold to rise." ”

"In the short term, the money flowing into the gold market is clearly supported by Russian/Ukrainian geopolitics, increased stock market volatility, and demand for inflation hedging," citi analysts said in the report.

Bob Haberkorn, senior market strategist at RJO Futures, said on Friday: "The latest developments around the Russia-Ukraine situation are positive, which has led to a slight pullback in gold prices. But this pullback will be short-lived, as lingering tensions will continue to support gold prices. ”

The Fed minutes were less hawkish than expected

The minutes of the Fed's January monetary policy meeting were also released this week, and their wording was far less hawkish than the market expected, allowing some investors to ignore the suppressive impact of the Fed's interest rate hike prospect on gold prices, and also provided opportunities for gold prices.

The minutes of the Fed's Jan. 25-26 meeting released Wednesday show fed policymakers agree that as inflation's impact on the economy expands and the job market is strong, it's time to tighten monetary policy, but any decision will depend on the analysis of data at each meeting.

Meeting minutes show the Fed is poised to thwart its fastest price increase since the 1980s. Policymakers said that while inflation is still expected to gradually pull back this year, they will be prepared to raise rates more quickly if needed.

"Most of the policymakers present noted that if inflation does not fall as they expected, it would be appropriate for the (Federal Open Markets) Committee (FOMC) to withdraw easing at a faster pace than they currently expect," the minutes show. ”

Fed policymakers say economic strength and high inflation would prove that rate hikes should be faster than the tightening cycle that began in 2015, when rate hikes were 25 basis points per hike, a claim that some analysts said could indicate a rate hike at every meeting remaining this year.

However, given that covid-19 infection in the United States was still near its peak at the time of the last policy meeting, the minutes of the meeting show no clear indication that policymakers are leaning toward a specific path. In particular, there is no hint that they will raise rates by 50 basis points at the March meeting to start this cycle of rate hikes.

After the minutes were announced, swap market traders expected the Fed to raise rates by 25 basis points at its March meeting more likely than a 50 basis point hike.

Of course, some Fed officials are more hawkish in their speech, which makes gold bulls still have some scruples. Analysts recommend focusing on resistance in the 1903-1923 area.

Cleveland Fed President Mester said Thursday that she supports the Fed's rate hike next month and tighten policy faster if necessary to curb inflation.

St. Louis Fed President Bullard said to crack down on inflation, it may require the central bank to adjust the benchmark rate above the neutral target rate , which he believes is around 2 percent.

Bullard reiterated his view that the Fed should raise rates by a cumulative 100 basis points by July 1 and begin shrinking its balance sheet in the second quarter to deal with the fastest inflation in 40 years.

In terms of economic data, the change in the number of initial jobless claims in the United States released this week is also slightly positive for gold prices. In the week ended February 12, initial jobless claims rose 23,000 to a seasonally adjusted 248,000, higher than market expectations of 219,000.

DailyFX strategist Michael Boutros said gold could rise to $1923 before encountering some significant resistance. The levels investors need to keep an eye on are $1903 (the highest weekly closing price since last year), and $1923. He thinks the $20 range is critical. If gold breaks this range, it will further open up upside.

Boutros said in an interview, "At the moment the fundamentals of gold look quite solid. Inflation is heating up, which is good for gold. Expectations of a Fed rate hike have risen, exacerbating geopolitical events that have exacerbated gold's rally. The deteriorating situation in Ukraine has sent markets in a panic and gold is preparing for a technical breakthrough. ”

Future Market Outlook: Institutions and retail investors are bullish on the future market

The latest Kitco News Weekly Gold Survey shows that the vast majority of market analysts and retail investors are bullish on gold in the short term. Despite concerns that easing tensions between the U.S. and Russia could cool safe-haven demand, analysts noted that gold was still well supported as it fell.

This week, 18 Wall Street analysts participated in Kitco News' gold survey. Of the participants, 13 or 72 percent were bullish on gold; three analysts (or 22 percent) were bearish on next week's gold price; and one analyst (or 5 percent) was neutral on gold in the short term.

Meanwhile, in an online poll of 864 ordinary investors, 564 respondents, or 65 percent, expect gold to rise next week. Another 196 or 23 percent were bearish, while 104 or 12 percent were neutral in the short term.

Sean Lusk, co-head of commercial hedging at Walsh Trading, said he believes gold prices are likely to rise to $1916 in the near term. In addition to the current geopolitical safe-haven demand, market uncertainty is increasing as central banks seek to tighten monetary policy globally, which creates some uncertainty for equities. The loose money that drives stock prices is coming to an end and a great reset is coming; we just don't know how bad it will be, and this uncertainty will continue to support any fallen gold.

However, Darin Newsom, president of Darin Newsom Analysis, said that technically, gold is overbought and needs to be corrected. But he added that he would not go short on gold now.

The following week, will usher in a series of economic data with relatively high market attention, first of all, the PMI data of European and American countries in February, then the correction of the US fourth quarter GDP data, and finally the PCE, personal expenditure and durable goods order data of the United States in January.

On Saturday (February 19), the office of the Joint Ceasefire Control and Coordination Center (JCCC) of the Donetsk People's Republic said Ukraine had shelled the villages of Novolaspa, Kommunarovka and Horlivka in Donetsk and fired more than 50 mines. According to the head of the "Donetsk People's Republic," the Ukrainian armed forces used mortars and bombers to launch attacks and used firepower to repel the enemy. The leaders of the donetsk civil armed forces in the eastern region of Ukraine issued a general mobilization order calling on all able male residents to join the local armed forces.

This article originated from Huitong Network