Inflation at a 40-year high, risk aversion sentiment and geopolitical uncertainty create a perfect storm for precious metals
It’s a combination of events that has resulted in momentum gains across the board in the precious metals markets today. Three main concerns have reinforced the bullish market sentiment that has previously been in play in precious metals markets, but today it appears that those concerns have been amplified.
The main concern is the current level of inflation in the United States which, according to the most recent data provided by the government, is 7%. The last time inflationary pressures were this high was in 1982, 40 years ago. Additionally, market participants are focusing on inflationary concerns over the Federal Reserve’s upcoming action at the upcoming FOMC meeting which begins Tuesday, January 25 and ends exactly one week from today. . Liftoff, a term used to describe the onset of interest rate hikes, is almost a certainty.
It is assumed that the Federal Reserve will announce the date when it will start to take off at next week’s FOMC. According to the CME Group’s FedWatch tool, the probability of the first-order hike occurring in March of this year is 94%.
Unquestionably, American businesses have become dependent on borrowing free money. The realization that this monetary policy that was adopted by the Federal Reserve to rebuild the economy in the United States is coming to an end is now sinking. US stocks have been under pressure and are trading lower for four of the last five trades. days.
In the case of the NASDAQ composite since January 12, the high-tech index has lost just over 6% in value. The Standard & Poor’s index lost about 4.2% in value and the Dow Jones Industrial Average fell about 3.61%.
Finally, although only a small component of the recent shift in sentiment in US equity and precious metals markets is the geopolitical tension mounting as Russian troops continue to mount on Ukraine’s border.
Each of these three factors could have a dramatic impact on market sentiment for US stocks and precious metals markets. However, the combination of all three factors existing simultaneously has created the perfect storm environment, sending the precious metals up dramatically today.
Palladium gained 5.09% in trading today, the largest percentage gain of the four precious metals traded in the futures market. After factoring in a gain of $96.90, palladium futures are currently priced at $2,001.50. Platinum futures have gained 4.58% and, after factoring in today’s gain of $44.90, are currently set at $1,024.40. Silver futures gained 2.99%, taking March’s most active futures contract to $24.195, after factoring in today’s gain of $0.70. Finally, the gold futures basis, the most active February contract, is currently pegged at $1,840.70 after gaining $28.30 or 1.56%.
All precious metals saw strong upside surges today with gold breaking above the current resistance level of $1833. Our technical studies currently indicate that the next level of resistance is located at $1851.60. The studies also indicate that the former resistance level could become the new support level at $1830.
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Wishing you as always good exchanges and good health,
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