Gold and metals see selloff after Russia–Ukraine peace talks
13:38, 29 March 2022
Gold and metal commodities fell sharply after the first day of negotiations between Russia and Ukraine in Istanbul yielded encouraging signals of a de-escalation of the conflict.
As of the time of writing, gold fell to $1,900 per troy ounce (t oz) after losing 1.7% a day earlier, while silver is down more than 2% to $24.3/t oz. Palladium has now plummeted by as much as 18% in the past three days, while platinum has dropped by 2.5% today.
"The talks with the Ukrainian side have just ended. The talks were constructive,” Vladimir Medinsky, the leader of the Russian delegation, told reporters.
Alexander Fomin, Russia’s deputy defence minister, also announced that a “sharp reduction” in military activities in the Kyiv and Chernihiv districts would begin immediately, with the expectation that Ukrainian troops will reciprocate.
Gold and silver are now trading at broadly the same levels as they were as the dispute broke out, while palladium and platinum are down by 10% and 8%, respectively.
What is your sentiment on Silver?
Metals performance since the Russia–Ukraine conflict
Riches to rags: How metals have performed from from 24 February 2022–29 March 2022 – Credit: Capital.com / Source: TradingviewDe-escalation and decreased oil prices hit gold
Precious metals have seen a selloff as the geopolitical risks and inflationary pressures of the energy crisis triggered by the Russia–Ukraine conflict have reduced.
Some metals, such as palladium, rose sharply in the early days of the war owing to concerns about Russian supply, which accounted for 40% of the market, but have since fallen as those concerns dissipated.
As for gold, the yellow metal has maintained a tight correlation with oil prices since the start of the conflict. The spike in crude-oil prices has served as a catalyst, further inflaming the market’s already elevated inflation expectations and driving the rush to gold as a safe-haven inflation hedge.
However, as a result of the recent surge in Chinese coronavirus cases resulting in fresh lockdowns in Shanghai, as well as the efforts towards de-escalation in the Russia–Ukraine conflict sending crude oil below $100 a barrel, the gold price has also fallen.
Gold has also been capped by rising expectations of faster rate hikes by the US Federal Reserve (the Fed), with the market now pricing in eight 25 basis-point (bps) hikes by the end of the year.
The correlation in oil and gold prices since the conflict
A chart showing the oil–gold correlation since the start of the Russia–Ukraine war – Credit: Capital.com / Source: TradingviewGold: key technical support and resistance levels
Gold technical analysis (1-day chart) – Credit: Capital.com / Source: TradingviewGold prices retraced their 38.2% Fibonacci level from the highs seen on 8 March and modestly bounced off support to sit at today’s 50-day moving average of $1,890.
Technically, support around 1.926 (50% Fibonacci) seems to have given way in the past two sessions, leaving the bulls to defend the levels at 1,890 and 1,850 against fresh assaults from the bears.
In the past two weeks, prices seem to have broken away from the bullish trendline formed in February, and have since been trading in a horizontal range between 1,890 (38.2% Fibonacci) and 1,960 (61.8% Fibonacci).
To revise prices above the resistance of 1,960, gold traders need to await a cooling off in the market, which is expecting rising US interest rates or new signs of tension on the geopolitical front.
Instead, a breakdown of 1,890 may prompt traders to consider the 1,850 region as the next support level.
Silver technical analysis: key support and resistance levels
Risk warning: Before investing in any asset, always do your own research or contact your financial adviser before arriving at a decision. Remember that your decision should be based on your attitude to risk, your expertise in this market, the spread of your portfolio and how comfortable you feel about losing money. Never invest more than you can afford to lose and keep in mind that past performance is no guarantee of future returns.
