As geopolitical tensions continue to rise on the border of Russia and Ukraine, both gold and the US dollar are truly acting as safe-haven assets. Currently, there has not been a diplomatic solution to the geopolitical tensions as Russia continues to move troops and equipment to the border of Ukraine and Russia. Russia continues to have military exercises on two of Ukraine’s borders. The United States has moved some troops into NATO countries. Collectively we are seeing a flight to safety which is playing out in exactly the scenario you would expect to see in such a tense geopolitical environment. US equities continue to trade under pressure, although today’s declines are mild to moderate. Dollar strength is evident, and most importantly, gold has seen substantial gains with moves almost parabolic.
The dollar is currently up by almost 3/10 % (0.30%), with the dollar index currently fixed at 96.355. Gold has exhibited sharp gains, and as of 4:10 PM, EST is currently fixed at $1874.50, a gain of $32.40. Considering that gold hit a low just below $1780 on January 28, the precious yellow metal has risen almost $100 in the last 12 trading days. Looking at a candlestick chart, we can see an abundance of daily green candles (this occurs when a commodity or stock closes above its opening price).
On a technical basis, one of the most useful charting techniques is a Japanese average chart called a Heiken Ashi chart. It differs from a standard candlestick chart. Although both charts use the same data points; open, high, low, and close, the Japanese average chart fixes the open from the midpoint of the previous candle. The market technician ascertains the current strength of the trend utilizing two observations. First is body size; the larger the body the stronger the trend. Secondly, because the open is the midpoint of the prior candle, the absence of lower wicks during a rally or the absence of higher wicks during a correction indicates increased strength.
Because the lack of a lower wick during the rally indicates that at no point during the trading session did pricing move to or below the midpoint of the prior candle. The chart we have included is a simple daily Heikin Ashi. The body size of the most current candle is extremely large with no lower wick. This indicates that the trend is exceedingly strong and indicates the high probability of higher pricing in the immediate future. Over the last six trading sessions on the Japanese average chart, candles contain no lower wicks with a moderate to large body size.
Another effective Japanese technical study is created by using a price break chart. According to StockCharts, “Invented in Japan, Three Line Break charts ignore time and only change when prices move a certain amount (similar to Point & Figure Charts). Three Line Break charts show a series of vertical white (or green) and black (or red) lines; the white/green lines represent rising prices, while the black/red lines portray falling prices. Prices continue in the same direction until a reversal is warranted. A reversal occurs when the closing price exceeds the high or low of the prior two lines.”
In the case of the chart in this article, we began with a daily candlestick before converting it. It projects higher pricing as the candle in purple, which indicates that three new high closing prices have occurred.
Because of the geopolitical tensions involving Russia and the fact that Russia produces the vast majority of palladium worldwide, we have seen palladium prices increase dramatically, with the greatest percentage gain today of all four precious metals traded on the futures exchange. While it is still just south by $600 of the record high when palladium traded to $3017 in May 2021, it continues to hold the title of the most expensive precious metal actively traded in futures. Basis the most active March 2022 futures contract palladium, has gained $167.90 in trading today, or 7.65%.
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Wishing you as always, good trading,
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.