Gold challenges record high but declines after hitting a high of $2078.80

Today gold spiked with a massive gain of $82, taking gold futures within $10 of the record high at $2088, which occurred in August 2020. Just as quickly as gold rose dramatically higher profit-taking and a recovery of U.S. equities resulted in gold trading off of the highs giving up over half of the gains from the intraday high. New York’s trading session just ended, and as of 1:30 PM EST, April futures are currently fixed at $2050, a net increase of $55 on the day.

We are witnessing extremely fast market conditions and it will be interesting to see how gold trades after the half-hour break, at which time (2:00 PM EST) Globex trading will begin remaining open until 8:00 AM EST.

Gold’s massive gains today are a continuation of investors’ flight to safety, incorporating gold as the go-to safe-haven asset. Today’s gains occurred with moderate tailwinds from dollar weakness which added to the dynamic gain.

Geopolitical tensions continue to grow as the Russian invasion of Ukraine continues to escalate. The Russian army is now disrupting routes that have been used for civilians fleeing through “humanitarian corridors.”

Now in its 11th day since the onset of the invasion, Russia’s military continues to struggle to capture major cities and incur losses of aircraft and armored vehicles. This has hardened Vladimir Putin’s resolve, resulting in the use of missiles and rocket strikes rather than using their 150,000 troops. After three rounds of negotiations, the only achievement was an agreement to continue to negotiate in an attempt to reach a cease-fire.

Another major factor fueling gold pricing higher is the current level of inflation with the CPI index up 7.5% year-over-year in January. The current level of inflation at a 40-year high most likely will continue higher based upon rising prices of both oil and food. Crude oil continues its historical rise today, gaining just over $3 and is currently fixed at $122.77 per barrel.

Food costs have also been rising globally. As oil rises so does the cost of producing and transporting food from farm to table. Europe is witnessing even greater increases in food costs as Ukraine exports a large portion of its agricultural products. Ukraine’s agricultural exports to Europe have been dramatically affected by the current military action by Russia.

On Thursday, March 10, the U.S. government will release the latest data on the current level of inflation and based upon the dramatic rise in oil and higher food costs, it most certainly will increase from its current levels.

Wishing you as always good trading,