Gold and the dollar both move higher as have the level of global uncertainties
There is an intrinsic negative correlation between the value of gold and the value of the U.S. dollar. This negative correlation is simply based on the fact that gold’s pricing is paired against the dollar. Changes in the price of gold are based on a combination of two factors; dollar strength or weakness and market participants actively buying or selling the precious yellow metal.
One scenario that results in higher values in both gold and the dollar is increased geopolitical uncertainty or tensions. That is exactly what we have seen recently with both the dollar and gold gaining value.
Yesterday Russia announced that it will mobilize 300,000 reserves as part of its mobilization according to defense minister Sergei Shoigu announced on Russian television Wednesday morning. But a much more powerful threat was made by Vladimir Putin threatening to use “all the means at our disposal” to defend Russia and our people.
“This is not a bluff! The citizens of Russia can be sure that the territorial integrity of our homeland, our independence, and our freedom will be ensured, I will emphasize this again, with all the means at our disposal. And those who try to blackmail us with nuclear weapons should know that the prevailing winds can turn in their direction.”
Threats by Putin to escalate their invasion of Ukraine by adding 300,000 troops and threatening to use their nuclear arsenal redefines the escalation of Russia’s invasion of Ukraine.
Pope Francis referred to Russian President Vladimir Putin saying the thought of using nuclear weapons in the Ukraine war is “madness”.
John Kirby, the National Security Council coordinator for strategic communications said that the recent action of Vladimir Putin is a sign that he is struggling. “It's definitely a sign that he's struggling, and we know that he has suffered tens of thousands of casualties. He has terrible morale and unit cohesion on the battlefield command and control have still not been solved. He's got desertion problems and he's forcing the wounded back into the fight. So clearly, manpower is a problem for him. He feels like he's on his back foot, particularly in that northeast area of the Donbas,”
German Chancellor Olaf Scholz called prudence announcement an “act of desperation”.
According to news sources, more than 75,000 Russian troops have been killed or wounded during the war in Ukraine prompting Putin to launch the largest escalation since they invaded Ukraine roughly 210 days ago. As long as the war continues to escalate it will move both gold and the dollar in unison to higher values.
Wishing you as always good trading and good health,
Gary S. Wagner - Executive Producer