Gold prices are trading sharply higher to kick off the week as the situation in Ukraine has deteriorated a great deal in recent days. The dollar index is also higher, while interest rates are lower today. Equities opened sharply lower and it would certainly seem that risk aversion is the theme of the day.
Russia has moved armed troops and equipment into the Crimea region over the last couple of days, and appears to be defying the West's wishes to stay out of Ukraine. U.S. Secretary of State John Kerry has had harsh words for Russia calling its recent actions an "incredible act of aggression". Mr. Kerry will be traveling to Ukraine in an attempt to calm the situation and voice support for the new government of Ukraine. Thus far, there is discussion of economic sanctions being placed on Russia which could really pressure an already fragile Russian economy. The U.S. and its allies have thus far remained focus on potential economic and diplomatic solutions to the current crises and do not appear to be discussing any military action.
Markets are clearly showing signs of stress as the crises continues to unfold. Tensions between the U.S. and Russia are quite high right now, and many are already comparing current tensions to that of the cold war. Equities opened last night sharply lower while gold prices popped and interest rates dropped. Crude oil prices as well as grain prices are significantly higher as well. The Black sea region is a key export hub, and further escalation of tensions could cause shipping disruptions in the area and potential supply issues. The next few days will be very critical to getting the current situation resolved in a peaceful manner, and investors will be watching closely.
The data this week is on the light side of the ledger, and would likely be overshadowed by the situation in Ukraine. Markets will, however, see the latest jobs data on Friday as the Department of Labor's non-farm payrolls report is released for February. Consensus estimates are looking for 150,000 jobs added with the unemployment rate staying at 6.6%. A good report could help stocks stay stable in light of the situation in Ukraine, while a miss could cause additional selling as the potential for more risk aversion takes hold.
Gold is at a four month high currently, and is approaching resistance at the $1361 area. A break above this level could set the stage for $1400 per ounce gold.
