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Why Russia and Ukraine's conflict could cause gold to rocket

by Timon Rossolimos, Analyst, Red Hot Trader, 03 March 2022
Why Russia and Ukraine's conflict could cause gold to rocket
I'm finally getting a strong reason to buy gold.

Unfortunately, it comes off the back of bad news.

And this news, is a potential war brewing between many different countries.

If things escalate, it could be a World War 3 threat…

Already, Russia, Ukraine, the EU, America, and the UK are talking about attacks, hacks, sanctions and even war threats…

And guess what has been flying up? Gold!

Yep, gold has already gained about 6% this month alone reaching up to $1,910 per ounce.

The last time we saw gold trading above that level was in early June 2021. This means, traction for gold is picking up and we can expect the price to continue to rocket.

In this article I'm going to share my thoughts on why Russia's and Ukraine's conflict could lead to a major rally in gold.

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Gold is rallying due to the potential sanctions against Russia

Early last week, Putin announced he recognised the independence of two separatist republics in eastern Ukraine. He also ordered Russian troops to enter.

Then last week Tuesday, President Biden said he viewed Russia’s move into Ukraine as the beginning of an invasion.

He announced the first wave of new US sanctions to cut off Russia from Western financing.

Next, the EU agreed to ban the purchase of Russian government bonds…

This has now led to fears that there are potential new wars brewing in Europe.

When Putin made the announcement, America and the EU started with their threats.

And in just one day, gold rallied above $1,900. This was the first time in 8 months, we saw gold hit these high prices.

One of the main reason’s why we saw gold rocket from this announcement is because it still has a safe haven reputation.

When investors are fearful and have uncertainty about countries geo-political tensions and wars, they tend to dump their risky assets and market positions.

Investors and companies then move their money into safer options and buy gold.

Here’s what Commerzbank analyst said in a note

"If the Ukraine crisis escalates further, we believe that gold will remain in demand amid the increased risk aversion, meaning that its price will probably make further gains,"

We then have both exchange-trade funds and hedge-funds adding their bets on gold in the next recent weeks according to Comex.

Next, analyst Greg Michalowski said on the ForexLive platform.

"The price is being pushed higher on flight to safety as Russian/NATO/US tensions increase,"

Final thoughts before we move to the charts…

This news is troubling as the USA and the EU is throwing threats at Russia and the UK is supporting America.

If Putin goes ahead with any attacks, wars, cyberattacks and hacks – this could have a major effect on stock markets.

Investors, will see gold more and more as a safe haven, which could be the catalyst it needs to head on up once again.

Best yet, the charts agree for the upside in gold…

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Why this Ascending Triangle is showing 8% golden rally
 

  
 
In the above daily chart of gold, we can see it’s been on a strong recovery in the last six months. It’s formed what’s known as an Ascending Triangle pattern (shaded area).

An Ascending Triangle is a formation where the price makes higher lows (yellow circles) and bounces on the same high ($1,860).
 
On Thursday, 17 February, the price broke above the high price.
 
This was at the same time when Putin made the above statement, I mentioned earlier.

This confirmed to me that the buyers are dominating the market and we can expect a lot more upside to come.
 
To calculate the next price target, I’ll simply take the difference between the high and the first low price of the formation and add it to the high price.
 
Price target = (High – Low) + High
                 = ($1,868 -$1,706) + $1,868
                 = $2,030
 
This means, we can expect another 8.6% gold price rally in the next few weeks.

And that’s just a start… When gold hits this level, the sky is the limit.

Here’s how I'll profit from the 8% gold rally

First, I'll be looking to buy (go long) JSE gold stocks and other commodities that move up with the gold price. The only way you’ll see these trade ideas is through my Red Hot Storm Trader service which you can try out here for 90 days risk-free.
Second, Our offshore trading service will be looking for international stocks to buy when the gold price rallies. Read more here...
  
Timon Rossolimos,

Analyst, Red Hot Storm Trader

PS.  There is a new safe haven many are considering other than gold… you can learn more about it here!



Why Russia and Ukraine's conflict could cause gold to rocket
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