Gold, silver, crude, wheat and stocks all on the move

So, the new month has started with a whimper for risk assets amid the Ukraine conflict. Watch the recording of our webinar from earlier for our latest macro and technical views.



Ukraine: There was a sense of optimism after Russia and Ukraine started talks that could potentially lead to a ceasefire, but that optimism has faded quickly.  It looks like the latest falls come on the back of remarks from Russia’s Defence Minister who said that Russia will continue it operation in Ukraine “until it achieves its goals.” Investors fear that Russia has gone too far to blink first.

Stocks: If you ever wondered how headline-driven markets looked like, well this is it. After staging an impressive recovery on Monday to close the weekend gaps, the major indices have started the new month on the back foot once again. This is hardy surprising given the Ukraine situation and the impact sanctions on Russia is having on the wider global markets. European banks for example have big exposures to Russian lenders. Anything negative in Russia is going to be bad news for foreign stakeholders. On a more macro level, the surging commodity prices are fuelling inflationary pressures further, reducing consumers’ disposable incomes, which is obviously not good.

Crude oil: In response to the worsening of geopolitical situation, crude oil has risen further today with WTI surging past $100 to reach a high so far of $101.50 per barrel. Making the situation worse, is the OPEC and its allies, including Russia of course. The group is likely to stick to their existing policy at Wednesday’s meeting. The OPEC+ will likely suggest that Russia’s invasion of Ukraine has not affected the OPEC+ deal.

Wheat: It is not just energy prices that have been roiled by Russia’s invasion of Ukraine. Global agricultural markets are feeling the brunt of the situation. Wheat prices added another 5% to their eight-plus-percent gains from the day before. There are concerns that Russian supplies of wheat and other grains it exports will be impacted because of sanctions. Countries in the Middle East and North Africa that rely on massive wheat imports from these and surrounding countries will feel the pain, not just because of reduced supply but also higher prices.

Metals: gold and silver remain largely supported amid haven flows due to the Ukraine situation. The metals are finding additional support from falling bond yields, which are further weighing on real yields with inflation continuing to soar. Bond yields have fallen as prices have recovered on safe-haven flows and with some investors reducing their expectations about aggressive tightening from central banks. Indeed, the odds of a 50 basis point rate increase from the Fed has been slashed to less than 5%, while the ECB’s first rate increase expectations have been pushed back to 2023 from December this year. Against this backdrop, I am expecting gold to go well north of $2,000.


Source: ThinkMarkets and TradingView.com