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Gold cracks US$2,000 per ounce

11 March 2022

Friday 11 March 2022

In this week's market report:
  • Gold above US$2,000 again
  • Bulls, there’s room for another rally
  • Australian gold price nears 18-month high
  • US inflation hits 40 year high
  • ECB point to inflation, energy risk and slowing growth
  • Time to ‘save’ in gold
Dear Investor,

US dollar gold price [XAUUSD]
Daily chart

Source: TradingView
(Click to enlarge)

Gold above US$2,000 again: Spot gold rose 3.15% this week to US$1,996 at the time of writing. Earlier in the week Au moved above US$2,000 per ounce to an intra-week high of US$2,069 per ounce.

Investors flock to gold: On top of physical gold in high demand, investors flocked to gold backed exchange traded funds (ETFs) in February, seeing around US$2.1 billion dollars (35.5 tonnes) of inflows.

Palladium hits all time high: Fears of a supply shortage pushed the spot Pd price to a new high of US$3,408 on Wednesday.
  • Silver is up 2.27% to US$25.73, with a positive technical picture forming for the metal.
  • Platinum has dropped 0.30% to US$1,080 per ounce.
  • Palladium hit a new high during the week and has since retreated, though Pd is up 4.74% to US$2,891 per ounce overall this week.
Bulls, there’s room for another rally: Au attempted to make a new high this week but was rejected. Though the yellow metal may attempt another run to US$2,065 in the coming days. This momentum, however, may face headwinds when the Fed meet.

Bears, the price may come to you: The Fed is expected to increase rates next week by 0.25%.  Look out for a potential drop to US$1,945. Any de-escalation in the Russian-Ukraine War may even put US$1,906 into focus.  

Australian gold price nears 18-month high: Gold in Australian dollars is up 2.75% this week to AU$2,713 per ounce. This week’s rally saw the Australian dollar gold price near an 18-month high of AU$2,848. The Australian dollar remains volatile, up by 0.65% to 73.42 US cents.

When will Australia join the tightening cycle? The Reserve Bank of Australia has shifted its stance on tightening, telling the market a rate increase may be plausible for 2022, instead of 2024 as the RBA has previously implied. With governor Philip Lowe saying, ‘It would be prudent to plan for an increase’.
Westpac CEO Peter King has said he understands people are interested in knowing when tightening will begin but say it’s important to assess the entire cycle. King suggests the RBA will ‘cap out’ at 1.75% rather than expected 2%.  

Conflict hits commodities stoking global inflation fears

As the Russian-Ukrainian War escalates, concerns of shortages and fractured supply chains impacted commodity markets. European natural gas prices, nickel, wheat all hit new highs this week. Low copper levels at the London Metals Exchange spooked base metal traders, Brent crude nudged US$140 per barrel and thermal coal doubled this week to never before achieved price.

This unprecedented rally in commodities will increase inflationary pressures globally and stifle global growth. Inflation is now likely to be far more persistent and higher than forecasters were predicting last year, concerning many forecasters that the market will need to reckon with a 1970s-style bout of stagflation.

US inflation hits 40 year high

US inflation data hit another new high this week, up 0.8% for the month of February, yielding a year-on-year figure of 7.90%. The highest since January 1982.
  • Price rises were largely driven by fruit and vegetables and petroleum costs.
  • Worth noting: February has not captured the most recent high oil prices since Russia launched a war with the Ukraine.
  • Soaring household costs are eroding any wage growth in the US.
  • The Federal Reserve Bank is expected to increase rates at the March meeting next week.
  • Some economists are forecasting seven rate rises in 2022.

US inflation numbers climb

Source: TradingView
(Click to enlarge)

ECB point to inflation, energy risk and slowing growth

The European Central Bank (ECB) surprised markets overnight by accelerating its reduction of stimulus on inflation fears as well as weak economic growth
  • ECB President Christine Lagarde said: ‘The Governing Council sees it as increasingly likely that inflation will stabilise at its 2 per cent target over the medium term…The war in Ukraine is a substantial upside risk, especially to energy prices’.
  • In addition, many EU member countries are reliant on Russian gas supplies. Prolonged conflict in the east risks an energy crisis for several countries, potentially driving energy prices even higher.

Inside our office this week…

Investors have been flocking to our 1Kg ABC Bullion Gold Cast Bars this week, as well many enquiries from parents looking to set up a ‘gold’ saving account for their children. Persistent inflation concerns are encouraging many to secure their children’s or grandchildren’s financial future by teaching them to save in precious metals. If this is something you’d like to do, click here to find out more.

Until next time,
Shae Russell
Group Communications Manager, 
For ABC Bullion

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