Weekly Digest: ECB Rate Hikes, Gold Up on Ukraine Tensions

Newsdesk

5 minutes read

Feb 17, 2022

fine gold bars with a green arrow pointing up symbolizing the gold price rising over continuing Russia-Ukraine tensions

17/02/22: The European Central Bank could raise interest rates in 2022, the gold price goes up as tensions over Ukraine resurface, Switzerland lifts most Covid-19 restrictions. And more.

The gold price edged up 0.3% to $1,874 an ounce on Thursday, a more than 1.5% increase over the week, supported by Russian media reports on mortar firing in Eastern Ukraine that spurred investors to pile into safe-haven assets. (Reuters)

Russia-backed rebels in eastern Ukraine accused government forces on Thursday of opening fire on their territory. Ukraine denied these accusations. The report comes as Russia has amassed over 100,000 troops close to the Ukrainian border, raising worries of invasion.

“Classic risk-off moves ensued late in the Asian session with equity index futures lower, gold and the yen higher. Traders are now waiting for any follow-through to see how this escalates," said Matt Simpson, senior market analyst, City Index.

Read our SPOTLIGHT to learn how the ongoing geopolitical tensions in Europe can affect the gold price and the global economy.

The Fed’s new mantra? Minutes of the January meeting show the Fed is not wed to a particular pace of interest rate hikes. (Reuters)

"Most participants noted that, if inflation does not move down as they expect, it would be appropriate for the (Federal Open Market) Committee to remove policy accommodation at a faster pace than they currently anticipate," the minutes stated.

the U.S. Federal Reserve press conference following the FOMC meeting on plans to increase interest rates to curb rising inflation

U.S. stocks bounced off session lows Wednesday with the S&P 500 crossing into positive territory by the closing bell after the Fed released meeting minutes. (Reuters)

All three major U.S. stock indexes were deep in negative territory for most of the trading session, as investors contended with shifting geopolitical tensions and data suggesting that the U.S. economy is heating up, thereby boosting the Fed's case for aggressive rate tightening.

But after the release of the Fed minutes, the indexes gyrated, eventually erasing losses

Read our SPOTLIGHT to find out whether the stock market crash will happen in 2022.

the U.K. flag with a white arrow pointing up symbolizing rising inflation levels in the country

Inflation alert: U.K. inflation came in at an annual 5.5% in January, remaining at a 30-year high and slightly ahead of forecasts. (CNBC)

December’s 5.4% annual increase in consumer prices was the highest since 1992, and it pushed the Bank of England to impose consecutive interest rate hikes for the first time since 2004 in a bid to tame inflation.

ECB’s top member says the bank’s bond-buying could end in Q3 2022. The ECB expects all bond-buying to stop “shortly before it starts raising the key ECB interest rates.” (CNBC)

“For me, increased optionality means that probably we should decide about an end date of the net asset purchases ... And I think it could be the around Q3, but the precise point needs to be discussed,” Francois Villeroy de Galhau, the governor of France’s central bank, said.

According to the ECB’s governing Council member, Martins Kazaks, the European Central Bank is “quite likely” to lift interest rates in 2022 to combat an unprecedented surge in inflation which has recently hit the highest level in almost 30 years.

a picture of a man tearing open his shirt hiding a gold bitcoin underneath

Crypto Superpowers: By the end of this week, Russia is expected to announce new laws for crypto assets that could potentially change the global crypto scene. (Business Insider)

For now, it remains unclear what the regulations will hold but, according to Russian media, cryptocurrencies are most likely going to be treated as foreign currencies.

This means that while crypto transactions will be allowed through licensed providers, they’re unlikely to be legal for day-to-day transactions like grocery shopping or buying new shoes.

Opinion

Simmering tensions in Europe and recent troubles in the stock market could offer clues to one question: Can bitcoin be a safe-haven asset? The answer of many market analysts is “no.” (Reuters)

"I don't see any evidence of bitcoin being a safe haven. The Ukraine situation with Russia is a really hard one to price, so in that situation, you just buy crude futures,” said Chris Weston, head of research at Melbourne-based brokerage Pepperstone.

Yet some say it's too early to dismiss the argument made by many bitcoin fans who say the world’s biggest cryptocurrency can become a store of value against riskier assets such as stocks.

In January, bitcoin briefly tumbled below $40,000, the lowest since September 2021. At the time of writing, bitcoin was traded at around $44,000.

Read our SPOTLIGHT to see how bitcoin and physical gold can act as supplementary assets in an investment portfolio.

What else is happening

Geopolitics update: Russia says it has begun pulling its troops away from Ukraine's border but Western officials say they have seen no evidence to support this claim. (BBC)

The US officials also said that Russia could launch a "false" pretext to invade Ukraine "at any moment,” while Moscow rejected all the accusations as “Western hysteria.”

The Swiss government has decided to lift most coronavirus restrictions starting this Thursday, as the record levels of infections triggered by the Omicron variant have not resulted in a peak of hospitalizations. (SWI)

People in Switzerland will no longer have to show COVID certificates in restaurants, bars, or other venues, but self-isolation for those infected with COVID will remain in force until the end of March, as will the requirement to wear masks in health care facilities and on public transport.

a hand of a man painted in colors of a Swiss flag and a COVID virus floating in the air after Switzerland lifts most of COVID restrictions in the country

🚀 Billionaire Richard Branson's Virgin Galactic Holdings Inc. said on Tuesday it was re-launching ticket sales for upcoming space travel to the public from on February 16. The announcement drove the company's shares more than 10% higher in premarket trading. (Reuters)

The tickets are priced at $450,000 each, including an initial deposit of $150,000.

"We plan to have our first 1,000 customers on board at the start of commercial service later this year," Virgin Galactic Chief Executive Officer Michael Colglazier said in a statement.

And finally

a woman walking on the beach with a metal detector, searching for ancient gold coins

A father was encouraged by his children to take up his old hobby of metal detecting. And what are the odds! On his first day using the new detector he found a medieval gold coin from the 13th century! (Business Insider)

🤩 The coin has sold at a London auction for £648,000 ($878,778).

 

See you next week!

 

Buy gold - buy silver

image-letter

The Spotlight

The free newsletter helping you understand how to build your wealth.


image-letter

Get the Spotlight

The free newsletter helping you understand how to build your wealth.