Russian Invasion Creates Extreme Volatility Across Asset Classes Including Gold

Last night Russia launched a full-scale invasion against the independent country of Ukraine. Russia’s ongoing military invasion intends to demilitarize Ukraine and then topple its political structure.

Vladimir Putin instructed his military to launch a “special military operation.” In an address, Putin said he had ordered this premeditated attack to protect pro-Russian sympathizers against “genocide” and “denazification” of the political leaders in Ukraine. Furthermore, he issued a stern warning on any government that would aid Ukraine, saying, “Whoever tries to hinder us… should know that Russia’s response will be immediate. And it will lead you to such consequences that you have never encountered in your history.”

The geopolitical crisis sent ripples through the financial markets resulting in one extremely volatile dispute in some time.

Equity markets worldwide experienced significant declines. In the United States, U.S. stocks sold off strongly when today’s trading session opened and recovered during the latter part of the trading day. The S&P 500 traded to a low of 4114.65 before recovering and closing higher on the day. The S&P 500 index is currently at 4288.70, gaining 63.20 or 1.50%.

Crude oil futures rallied to just over $100 per barrel ($100.54) and then gave up most of those gains closing at $93.08 per barrel.

Gold traders also witnessed a volatile roller coaster with a tremendous price swing of almost $100 over the last 18 hours of trading. Gold futures basis most active April contract traded to a high of $1976.50 during the initial hours immediately following the invasion and then traded to a low of $1878.60 before recovering. As of 4:45 PM, gold futures are currently fixed at $1905.40, a net decline of five dollars on the day. This tremendous price swing can be easily identified in a daily chart of gold.

Gold’s price decline following the major breakout and price gain of $66 was influenced by a rapidly recovering U.S. equities markets as well as extreme dollar strength. Gold is currently down by 0.36% and the dollar is now trading 0.93% higher.

Our technical studies and fundamental analysis of gold suggest that it maintains its overall bullish demeanor even with today’s wild price swings. The fact that gold traded to a low of $1878.60 and has currently recovered and is trading solidly over $1900 per ounce suggests two things. First, the geopolitical crisis resulting from the invasion by Russia is a fluid and moving event that is still unresolved. Secondly, inflationary pressures continue to rise in both energy and food costs. These two factors highly support the premise that gold will continue to move to higher pricing.

Wishing you as always good trading and good health,

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Gary S. Wagner