LiveWire

The yellow metal after briefly touching the 2'000 level is back down to USD1'900, a support provided by its EMA so far. Gold's rally this year has been partly predicated on the view that the surge in commodity prices will make already hot inflation persistent. However, that might no longer be the case as future growth is becoming uncertain due to multiple factors, notably, China's zero Covid policy, the war, and Fed's attempt to cool down the economy. 

Gold's resilience amid rising US real rates and a stronger dollar has been surprising. Investors seem to have chosen to stay long as a way to hedge geopolitical and inflation risks. As the war in Ukraine enters a "second phase" and as technicals are so far positive (shown by higher highs) will buyers continue to step in to buy the dip?

Oil surged 7% on Tuesday, the most in three weeks after Putin vowed to continue the war in Ukraine, which has rattled markets and tightened global crude supply. Putin said peace talks with Ukraine are “at a dead end” as the war continues into its second month. Meanwhile, Covid lockdowns in China continue to weigh on fears oil demand could fall, although some restrictions in Shanghai have been lifted, an encouraging sign, as China continues with its strict Zero-Covid policy that has caused chaos. On a technical picture, as long as WTI remains above the psychological level of USD100, it should be an encouraging sign that it could resume climbing higher. 

So far this year gold is outperforming greatly stocks (and the S&P500), up nearly 6%. Hot inflation numbers and geopolitical uncertainties are firmly supporting the price of yellow metal, currently consolidating around USD1'930. If history is any guide, precious metals and commodities, in general, are the best performing asset class during low growth and high inflation environment, suggesting gold and other hard assets could be the big winners of the year.

The Biden administration is considering a plan to release roughly a million barrels of oil a day from US strategic reserves, for several months, to fight rising gasoline prices and supply shortages following Russia's invasion of Ukraine. As of March 25, the reserve had 568 million barrels remaining. The plan is accompanied by a diplomatic push for the International Energy Agency to coordinate a global release by other countries. WTI is now trading more than 4% lower on the news, at roughly USD102.8. OPEC+ will meet today and is expected to approve a modest increase in supply. Biden will speak today about his efforts to reduce energy prices.