There is no doubt that market sentiment is fluctuating among investors focused on inflationary pressures and Ukraine or on the US Federal Reserve’s monetary tightening. Inflationary pressures and the war in Ukraine are creating bullish market sentiment for the safe haven asset class, particularly gold. In contrast, reactions to the Federal Reserve’s monetary policy, which includes a series of rate hikes and an outflow of its balance sheet assets, are leading to bearish market sentiment for gold.
It seems that market participants are switching between these factors day by day. For today, market participants are once again focusing on rising inflation and the war in Ukraine. Regarding the war, it seems highly unlikely that there will be a peaceful solution any time soon. Rather, concerns have been raised about excessive military action and attacks on civilians in Ukraine. The war in Ukraine has also impacted and pushed up global inflation. At present, Ukraine and Russia jointly export a large percentage of wheat and other agricultural products to European Union countries, and the war has put agricultural products such as wheat under more pressure.
As of 4:10 p.m. EDT, the most active June 2022 gold futures contract is $11.50 or 0.60% and is currently fixed at $1934.80. Gold traded today at a high of $1941.70 and a low of $1923.30. At the same time, the dollar was extremely strong this weekend, which provided moderate headwinds for gold prices. The entire precious metals complex in the futures markets gained on the day.
Silver futures are up almost a full percent (+0.97%) or $0.23 and are currently at $25.695. Palladium futures are trading up 2.62% on the day at $2242 an ounce. However, it must be noted that there has been exceptionally high volatility and selling pressure to the downside over the past five weeks. For the week of March 7th, palladium traded to a record high of just over $3,400 an ounce, down about 30% from current prices. Russia is a major producer of platinum and palladium, supplying around 30% of the palladium used in the automotive industry’s catalyst production.
Additional sanctions by the United States and the European Union are further isolating Russia. However, it also increases the likelihood of dramatic military action in response or justification for escalating their military campaign.
Finally, market participants remain focused on the March FOMC meeting minutes released yesterday and statements by Federal Reserve members that indicate a much more hawkish tone and pace at which they will tighten monetary policy to slow the pace at which inflation is rising.
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