Gold breaks $2000 - Meanwhile Copper makes its move
It’s been a violent start to the week as the Russian/Ukraine conflict intensifies and news that the Biden administration and its allies are discussing an embargo of Russian oil. This article discusses what the spillover from the weekend’s events means for gold and copper.
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Gold
In recent months, one of our strongest views has been a bullish view of gold as a hedge against inflation, equity market volatility, and geopolitical tensions noted here.
After a strong run higher in recent weeks and the implementation of sanctions designed to cripple the Russian economy, there are concerns that the Russian Central Bank will sell some of the 2300 tonnes of gold reserves it, which may send the gold price lower.
A key sanction introduced by the West was restrictions on Russian Central Bank reserves. In practice, what this means is it will be challenging for Russia’s central bank to sell its gold holdings on market. If Russia were to find a third party willing to transact, it would likely be an off-market transaction and less likely to impact price.
As a result, we think the long gold trade can continue to perform well. Following this morning’s break of the psychologically important $2000 level, gold bugs will be delighted. However, we don’t expect it to stop there.
As per the wave count on the Weekly chart below, the expectation is for a test and break of the 2020, $2075 high noted here, before a move towards $2200 to complete a five-wave advance from the November 2016 $1046 low.
Copper
During the first two months of 2022, weakness in the Chinese economy and prospects of a more aggressive Federal Reserve hiking cycle overshadowed record low copper inventories.
However, all that changed as the Russian/Ukraine war escalated last week, sending copper to fresh record highs and as China announced an above-consensus GDP target of around 5.5% over the weekend at the NPC.
Technically there is room for the rally in copper to extend towards $5.25 in the coming week to complete a five-wave advance from the March 2020, $1.9725 low.
Source Tradingview. The figures stated areas of March 7th, 2022. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation
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Gold
In recent months, one of our strongest views has been a bullish view of gold as a hedge against inflation, equity market volatility, and geopolitical tensions noted here.
After a strong run higher in recent weeks and the implementation of sanctions designed to cripple the Russian economy, there are concerns that the Russian Central Bank will sell some of the 2300 tonnes of gold reserves it, which may send the gold price lower.
A key sanction introduced by the West was restrictions on Russian Central Bank reserves. In practice, what this means is it will be challenging for Russia’s central bank to sell its gold holdings on market. If Russia were to find a third party willing to transact, it would likely be an off-market transaction and less likely to impact price.
As a result, we think the long gold trade can continue to perform well. Following this morning’s break of the psychologically important $2000 level, gold bugs will be delighted. However, we don’t expect it to stop there.
As per the wave count on the Weekly chart below, the expectation is for a test and break of the 2020, $2075 high noted here, before a move towards $2200 to complete a five-wave advance from the November 2016 $1046 low.
Copper
During the first two months of 2022, weakness in the Chinese economy and prospects of a more aggressive Federal Reserve hiking cycle overshadowed record low copper inventories.
However, all that changed as the Russian/Ukraine war escalated last week, sending copper to fresh record highs and as China announced an above-consensus GDP target of around 5.5% over the weekend at the NPC.
Technically there is room for the rally in copper to extend towards $5.25 in the coming week to complete a five-wave advance from the March 2020, $1.9725 low.
Source Tradingview. The figures stated areas of March 7th, 2022. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation
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- Choose your position and size, and your stop and limit levels.
- Place the trade.
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