Damp Squib Sanctions Cause Precious Metal Selloff

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Gold Loses Luster on FOMC Rhetoric

Damp Squib Sanctions Cause Precious Metal Selloff

Global reactions to the pseudo annexation of Crimea by Russia have been surprisingly muted. Threatened sanctions against President Putin’s regime by the US and Europe have come to nothing as the actual action taken falls firmly into the damp squib category.

Washington placed travel restrictions and asset freeze orders on a total of seven Russian citizens. None of these seven individuals are actively engaged in global travel or for that matter hold any international assets. Europe did slightly better by imposing similar sanctions on a total of 21 Russian individuals although again none are in the billionaire oligarch class that may have had the potential to impact Putin’s decisions.

In light of these nominal sanctions there is little further reaction expected from Moscow in the coming days. This gives a certain confidence to investors that are now moving funds back into risk assets as they seize this opportunity to earn some reasonable yield.

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Needless to say the safe havens are experiencing some withdrawals, Precious Metals in particular are no longer required to temporarily store wealth. Gold has given up the highs of $1,390/Oz that it posted going into the weekend. Gold Spot found support earlier this morning around the $1,360/Oz level before recovering slightly to current levels at $1,363.25/Oz.

Geopolitical risks have subsided for now but tensions in the Ukrainian crises have oscillated substantially over the past few weeks and there is no real reason to yet consider this chapter closed. Gold and other Precious Metals are likely to remain in favor while this crises continues to simmer in the background, which could be for sometime to come.

Technically speaking, Gold has formed a very defined upward price channel dating back to it’s long term pivot in mid-January of this year. The 20 day moving average has successfully served as support on 3 occasions since this run up began. In fact the $1,390/Oz turning point yesterday also happened to coincide with the top band of this upward range. The implication here is that even a further subsidence in global risk is unlikely to deviate this Precious Metal too much from it’s long term upward trajectory.

To contact the reporter of this story: James Brennan at james@forexminute.com