This question is extremely applicable to the current conflict because it will exponentially magnify the record high level of inflation which began years ago as the Federal Reserve and central banks embarked on one of the most accommodative monetary policies ever.

Inflation is currently running at 7.9% and new forces emerging over the last month will exponentially magnify the pace at which inflation continues to grow. It could challenge the highest level we have seen in since 1979. If this unfolds, we would see gold move exponentially higher.

Yesterday’s market sentiment was an underlying explanation of why gold traded lower on the day. Market participants focused upon Chairman Powell’s speech on Monday, where he opened the door for larger rate hikes (1/2% rather than ¼%) at one or more of the six remaining FOMC meetings.

As of 4:55 PM, EDT April gold futures are down $8.80, or 0.46% on the day, and are fixed at $1920.90. Spot gold is currently trading $14.50 lower, or 0.75%, at $1921. Today’s decline in the precious yellow metal can be directly attributed to investors reacting to a speech by Chairman Powell.

After declining over $60 per ounce last week gold found solid footing and support at approximately $1920. As of 4:30 PM EDT gold futures basis, the April 2022 contract is up by $6.50 and fixed at $1935.90. April gold has become spot pricing with a first-day delivery notice on Friday of this week.

This week market participants seemed complacent in regards to the Russian invasion of Ukraine, and the current level of inflation. Four of the five trading days this week were characterized as having lower closes than its opening daily price as well as lower closes compared to the prior day closing price.

Yesterday the Federal Reserve initiated their first interest rate hike since 2018, taking the Fed Funds rate from 0 - ¼% to ¼% - ½%. The rate hike of ¼% was not only anticipated by market participants but was also factored into current pricing.

The Federal Reserve concluded its March Federal Open Market Committee (FOMC) meeting today with the anticipated initiation of “liftoff”, or interest rate normalization by raising the Fed Funds rate by ¼%. While today’s rate hike fell within expectations of analysts and market participants there were pronounced changes in the overall demeanor of the Fed’s monetary policy.

As of 3:40 PM, EST gold futures basis the most active April 2022 Comex contract continues its steep decline currently down $43.50 or 2.22% and is fixed at $1917.50. In the last two trading days, gold has declined approximately $71, trading to its lowest closing value in the last three weeks.

As of 3:30 PM, EST gold is trading off by $29.20, or 1.46%, with the April 2022 Comex contract currently fixed at $1956.00. On a technical basis, today’s low of $1952 is just below the 38.2% Fibonacci retracement, which is currently at $1953.80.