Gold Hovers Around $1900, Bitcoin Breakout

Gold Hovers Around $1900, Bitcoin Breakout
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OANDA – Stock pare losses, Crude rallies, Gold hovers around $1900, Bitcoin breakout

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Q4 2021 hedge fund letters, conferences and more

Alkeon Sees High-Quality Growth Stocks Getting Scarce

InvestAlkeon Growth Partners was down 10.15% for January, compared to the MSCI World’s -5.34% return and the MSCI AC World’s 4.96% decline. Since its inception, Alkeon has returned about 2,000% or 13.48% on an annualized basis. The MSCI World is up 226.62% for an annualized return of 5.04% since Alkeon’s inception, while the MSCI AC Read More

US stocks clawed back losses as investors prepared for a massive economic downfall for Russia now that the Western nations are intensifying sanctions. Wall Street finished in the red as Russia’s financial meltdown led to some contagion worries and as surging commodity prices will continue to fuel inflationary pressures that will lead to growth concerns later this year. It is nearly impossible to be aggressively bullish given the geopolitical uncertainties and continued upward pressures with inflation.

All eyes remain on the war in Ukraine and every move Russia makes. The Russian Central Bank (CBR) decided that the Moscow stock exchange would not resume stock trading tomorrow. Intensifying sanctions will likely be debilitating for Russia’s economy and banning transactions with the Russian central bank, foreign ministry and sovereign wealth fund is just the start of the West’s hardline.

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Oil

Crude prices surged after the West delivered a stronger round of sanctions that raised the risk that Russian energy supplies could be next to get targeted. Energy traders are awaiting the US and allies to tap their strategic reserves, which could unleash 70 million barrels of oil. The oil market will remain very volatile as the risk of losing access to Russian energy supplies grows. The uncertainty over how the Ukraine war will unfold has too many risks that include nuclear threats, which means any oil prices dips on any strategic release announcement will be short-lived.

Russia and Ukraine may have another round of talks, but it doesn’t seem like anyone is optimistic that a major de-escalation will happen anytime soon. OPEC+ is expected to stay with their gradual output increase strategy this week, ignoring global calls for increased output. Crude supplies are not increasing at a fast enough pace and the energy market is still very vulnerable to a massive shock. Brent crude still seems poised to make a strong run well above the $100 a barrel level over the short-term.

FX

Russia is trying to prevent the rouble from another plunge. The rouble plunged when trading started this week as the latest round of sanctions were much more hard-hitting than the first ones. It is hard to get out of a rouble position after President Putin’s ban on Russian residents from transferring FX abroad and the US banning transactions with the Russian central bank. The rouble will remain a rollercoaster ride, but the risks are elevated that Russia’s currency could see further pain if FX markets want to be against the Russian central bank.

Even the Swiss have abandoned their traditional neutral stance and will abide by the Russian sanctions. Crude prices are consolidating just below the $100 level, but once we are beyond the OPEC+ meeting and have a better handle of Iran nuclear deal talks, bullish momentum should return.

Gold

Gold prices are higher but are underperforming other commodities and cryptocurrencies. Gold is somewhat stuck at the $1900 level and that might persist until global growth concerns intensify. Gold will get its groove back once inflationary pressures threaten growth prospects. Stagflation will be the key word that gets tossed around and that should ultimately trigger safe-haven flows towards gold.

Gold investors looking for it to rally back towards $2000 will need to be patient. Gold could have one major shock if Russia is forced to offload some of its gold holdings. Gold should find strong support around the $1840-$1850 area if bullish bets are pulled off the table.

Cryptos

Western allies are delivering harsher sanctions and restrictions on Russian banks and that is bolstering the argument for blockchain products that will compete with the SWIFT network. Bitcoin and all the top altcoins are rallying today as investors realize the likelihood of massive investments into DeFi following the latest round of Russian sanctions.

The White House and Treasury are also looking to make it harder for Russians to use crypto to get their money out of Russia. The fact is that some Russians have already done that and now they will be stuck hodling until sanctions are removed, because they don’t want to risk getting caught and losing their entire crypto investment.

Article By Edward Moya, OANDA

Updated on Feb 28, 2022, 5:22 pm

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