Gold prices are trading moderately higher as investors wear their nerves on their sleeves going into the weekend. Stocks are trading slightly higher today, but this could potentially reverse course as the day wears on. The dollar is trading lower while bonds and notes are flat.
The situation in Ukraine continues to dominate the headlines, and unfortunately could be headed for further escalation. A vote on secession is still scheduled for Sunday in Crimea, and tensions will likely remain very high going into the vote. Russia appears to be mobilizing more troops near the Ukrainian border, and has been busy conducting war games. This would seem to indicate that there is a strong possibility for further military action in the region, and concern is growing about the potential consequences.
Thus far, tough rhetoric from Washington and members of the EU does not appear to be deterring Russia at all. It is expected that tough economic sanctions may be announced next week by the US and the EU. Whether or not this acts as an effective deterrent remains unclear, as thus far Russian markets have been kicked in the teeth yet Russia does not appear fazed and seems intent on its current course of action.
Also at the forefront of investor psyche is the continuing worries over China and its slowing growth. China, as the world’s second largest economy, has been a key driver of the economic recovery thus far. Signs of kinks in their economic armor could spell trouble for world stock markets and risk assets. Data coming out of China will be monitored closely, and should further weakness be seen gold could stand to benefit as the risk-off mentality takes hold.
Gold prices remain in a strong uptrend on the daily charts. In fact, this past week saw an upside breakout in the yellow metal as it broke through overhead resistance in the $1360 area. It would seem feasible that a test of the $1400 level could be in store over the coming sessions. Not only is gold benefiting from an improved technical background, but the ongoing geopolitical turmoil could help keep a floor under gold prices for the foreseeable future. It seems plausible that gold will likely continue to be bought until a long term solution over Ukraine is reached. Needless to say, from the current point of view, that seems like it could be a ways off. This weekend will be very important and could lead to a volatile open on Sunday night in world markets.
