Gold is one of the most traded commodities and assets in the world. In fact, there are several ways for trading Gold. However, the most common way for trading the commodity is through derivative contracts, contracts for difference (CFDs), as well as other futures and options contracts that give access to the market and are great opportunities for trading Gold and benefiting from the great market movements that it usually offers in a short period of time.

Fundamental

The reason why we have seen huge spikes in the price of Gold in the last 3-5 trading sessions has been mainly driven by investors’ desire for safe-haven assets. Safe-havens are instruments that tend to perform well during times of uncertainty in the market, such as war, global economic crisis, political uncertainty, natural disasters etc. In other words, the current military conflict between Russia and Ukraine has caused lots of trouble across the globe and that has been the reason why investors started looking for more safe and secure assets to invest their capital in. For hundreds of years Gold has been the best and most stable safe-haven asset that investors consider least risky during such times on the market and that simultaneously presents an attractive alternative for their portfolios. Risk-on assets like stocks tend to experience sharp declines in times of conflict and uncertainty, as it has been the case this time around as well. So, when investors start taking their money out of the stock market they need to find an alternative investment opportunity with lower risk and a higher potential return, thus they flee to risk-off assets like Gold. This makes the fundamental story and general momentum behind Gold at the moment very favorable. Last but not least, the Russian central bank announced late last night that it will start using some of its reserves from today (Monday) to buy more Gold in order to protect itself from western sanctions.

Technical

Back in January we published a detailed analysis on why we expect Gold prices to move sharply higher in 2022 and beyond, projecting target levels to the upside of around $2,500 per troy ounce.

Here you can read more about the bullish multi-year technical pattern that is playing out at the moment.

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We believe that the recent geopolitical tensions in Europe will prove to be the catalyst that will set the beginning of a multi-year rally for Gold. Last week, we saw a huge spike to the upside for Gold taking the price from $1,890 to over $1,970 per troy ounce in just a couple of hours right after Russia initiated its first attack on Ukraine (February 24th). Since then, the price has retraced back all the way to the horizontal (black line) and upward sloping diagonal (blue line) support lines where buyers have continued to come in and buy the dip. The price is in a strong multi-day uptrend at the moment as it continues to set higher highs and higher lows. The RSI is trending higher, showing the relative strength and momentum in the market is also improving. The MACD has also crossed the signal line to the upside (the circle), which is another bullish signal, supporting another sharp rally from here.

In our opinion, opening a LONG Gold position at current levels presents a tremendous buying opportunity for generating exceptional returns in these uncertain market times. We have significantly increased our exposure to GOLD in our corporate investment portfolio over the last few trading sessions, thus taking advantage of the retracement in the price. The risk-reward ratio is also highly-attractive since, you can easily place either a more defensive stop loss to your long position at around $1,869 or a more risk-oriented stop loss anywhere around the $1,825-1,835 region. In both cases your risk to the downside is a lot smaller than the short-term upside targets of $1,990-$2,050 that we expect the Gold price to hit in the coming days and weeks.

Conclusion

We are monitoring closely all of the developments in the Russia-Ukraine conflict and unfortunately it seems that tensions, uncertainty and fear might continue to rise in the coming days. Thus, we believe that investors will continue to trade with a risk-off sentiment, which will continue to support commodity and safe haven asset prices, like gold.

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