Two trades to watch: Gold, oil

Gold jumps to a 13 month high as Russia attacks Ukraine. Oil rises over $100 per barrel

Gold 2

Gold shoots higher as Russia invades Ukraine

Risk off trade is sending the safe haven, gold, to a 13-month high as Russia launches a full-scale invasion into Ukraine, in an attempt to demilitarise the country.

The Russia, Ukraine situation has quickly escalated from a diplomatic crisis into an all-out invasion, sparking fears of war in Europe.

President Biden condemned the "unprovoked and unjustified" move by Putin and pledged a severe response. He is meeting with G7 leaders today to decide on the route forwards.

Fears of a war in Europe and fears over what sanctions the West could impose on Russia are hitting risk sentiment driving safe haven demand.

Where next for Gold prices?

Gold has been trending higher, forming a series of higher highs and higher lows. It traded within an ascending channel dating back to early February and has broken out of the rising channel hitting a high of $1950.

The RSI has pushed into overbought territory, for this first time this year, so some consolidation or even a move lower could be due, to bring Gold back below 70 on the RSI, the level above which denotes overbought.

Buyers will look for a move over $1950 to target $1958 the January 2021 high, before bringing $2000 into target.

Support can be seen at 1934 the upper band of the ascending channel. A break below here could bring $1915 the February 22 high into play ahead of $1890, yesterday’s low and $1878 the November high.


gold chart

Oil hits $100

Oil is charging higher on news that Russia is attacking Ukraine. The latest developments have accentuated supply fears, in what was already a tight market.

Fears that supply will be disrupted have sent oil prices to levels not seen since 2014.

Whilst the West was careful to avoid sanctions on Russian oil in the first round, they may still hit energy supplies in the next round of sanctions, which are expected to be much harsher. However oil sanctions still seem unlikely given how reliant Europe is on Russian oil and energy.

Alternatively, a perhaps more likely, Russia could decide to limit supply of energy to Europe in retaliation to Western sanctions. 

Where next for oil prices?

Brent has been trading within a rising channel since the end of December. The price briefly spiked out of the upper band of the channel.

The 50 sma has crossed above the 100 sna in a bullish signal at the start of the month.

More recently, the RSI is in overbought territory suggesting that there could be a pullback or at least some consolidation before further gains.

Buyers will look for a move over 101.91 for fresh 7 year highs opening the door to potential move towards 102.00 and on to 105.00.

A move below 94.40 could negate the near term up trend. A move below 89.10 could see sellers gain traction.



oil chart

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