The beauty of gold, aside from its luster, is its predictability in price movements. Gold has been a barometer of economic and geo-political stability throughout the course of modern trading. Gold can fluctuate day-to-day, but traders pile into when economic data from leading economies is poor or threats of war breakout. Traders, also, exit when the general market participant psyche is copacetic with the current climate.
Gold has seen a monster rebound from last year’s meltdown as global economic data has been muted over the last few months, particularly in the United States and China; but, the ongoing tensions in Ukraine and Russia’s invasion is sparking the appetite of traders as they head for portfolio hedges.
China’s data continues to show weakness as the industrial production numbers and foreign direct investment (FDI) came in lower than expected. Much of the worry has been displaced as China is going through a typical skid during the Lunar New Year, but it is unknown how deep the cut is and whether or not it will fester.
Gold seen a pullback, breaking $1,300 per ounce, earlier this week before blowing through $1,370 an ounce on fresh news on that Russia is trying to influence the annexation of the Ukrainian peninsula of Crimea, which has a large ethnic Russian population. It is unknown if Vladimir Putin’s meddling in a sovereign nation will spark military action down the road. It is unlikely, but the United States and European Union (EU) are debating on economic sanctions actions against Putin.
Price action is finding some resistance nearing $1,376 per ounce, and the last session held a tight range after strongly breaking through the 38.2 percent Fibonacci level from the yearly low. Support from a pullback can be seen at $1,363/65 per ounce, while deeper support will lie at $1,342 and $1,331 per ounce.
To the upside, a break of current resistance levels could propel gold to $1,397, potentially hitting $1,400 per ounce that marks the 50 percent retracement from the 2013 sell-off.
Momentum remains strong, and continued geo-political tensions and poor economic data will keep gold elevated. However, a pullback is seen as healthy to ensure the continued trend.