Gold markets have spiked higher during the course of the trading session on Thursday as we continue to see a lot of noisy behavior due to fear coming out of the Ukraine border, and of course the fact that the Russians have now invaded the country. Whether or not they do a full-scale invasion is a completely different question, but at this point it certainly looks as if the market has started to come to grips with the idea that this war may not expand, and that has had gold selling off quite rapidly. Because of this, we have a nasty looking candlestick that is akin to a “blow off top.”
A “blow off top” is of course when the market shoot straight through the air and goes parabolic before selling back on. This may be what we have just seen, but a lot of this is going to come down to what Vladimir Putin does next. If he does in fact choose peace and stands down a bit, that could help gold sell off even further. Beyond that, sanctions from the West seem to be somewhat limited still, and the United States has flat out said that it will not have “boots on the ground in Ukraine.” Because of this, the specter of World War III has gone by the wayside.
It simply looks like the West is going to roll over and let Russia have Ukraine. Weakness might have actually saved a lot of the markets at this point, because quite frankly it is a market that is not so concerned about Ukraine, but an escalation of tensions. At this point, the market also had turned around in New York as the Americans bought everything hand over fist after selling off quite drastically. For example, the NASDAQ was down a couple of percent at one point, only to turn around and break towards a positive print.
Gold had gotten too far ahead of itself, and as I write this the gold market is trying to break below the $1900 level. That is astonishing considering that we had been as high as $1975 or so just a few hours before. Volatility continues to be a major issue, and is not going anywhere anytime soon. With that in mind, you need to be cautious with your position size, especially in a thin market like this.
