Gold flirted with $2,000 on Monday, led by safe-haven demand after a long weekend. Bitcoin dived below $40,000 and Ethereum below $3,000 in the previous trading session.
Rising geopolitical risks push investors to gold
Despite the downward pressure from the rising US dollar and US Treasury yields, risk aversion has driven more investors to gold. After the Ukrainian authorities said that Russia had launched a new offensive in the east of the country, Russia’s invasion of Ukraine was once again on the agenda at the beginning of the week.
In addition to geopolitical uncertainty, recession expectations of various banks are increasing. The International Monetary Fund (IMF) has warned that Russia’s attack on Ukraine could threaten the world’s economic recovery. The IMF is scheduled to lower its global growth outlook this week as it begins its Spring Meetings on Monday.
The bells of recession heard?
The World Bank lowered its global economic forecast for 2022 from 4.1% to 3.2%, citing Russia’s invasion of Ukraine. “Countries are under severe financial stress, 60% of low-income countries are already in debt distress or at high risk for it,” World Bank chief David Malpass said on Monday.
Banks such as Goldman Sachs predict that markets will remain cautious as the risk of recession rises in the US. “No one has an answer for when and how the recession will hit,” said Hussein Sayed, chief market strategist at Exinity.
But the probability of one happening is increasing. Inflation in the world’s largest economy is running at its highest level in four decades. The Fed is trying to tighten policy and will likely start raising rates in 50bps increments. China’s zero Covid policy creates more supply chain shocks and of course there is a war in Ukraine that shows no signs of ending soon.
“Strong buying interest from ETF investors gave buoyancy to gold”
Gold managed to break the $2,000 level early Monday, as we reported on Kriptokoin.com, however, prices retreated later in the session. Gold has seen strong bids in safe-haven properties, according to analysts. Commerzbank analyst Daniel Briesemann says:
Russia appears to be preparing to launch a major offensive in the east of the country. This creates a serious demand for gold as a safe harbor. One of the factors that has revived gold in recent days has been the strong buying interest of ETF investors.
Buying opportunity for gold on dips
Nicky Shiels, head of metal strategy at MKS PAMP, says the precious metal is climbing steadily. By recommending buying on pullbacks, Shiels draws attention to the following levels:
The $1,900-1,950 range has been replaced by $1,920-1,960. This has now gone as high as $1,950-1,980. Gold has not garnered broader general support, but the courage of this crowd seems insufficient. Bears on the sidelines are below $1,900 but bulls are above $2,000.
Has the worst been seen in crypto? Otherwise..
On the other hand, the crypto space has fallen along with US stocks. Bitcoin has traded below $40,000, down more than 5% over the past seven days, and Ethereum below $3,000, down more than 8%, respectively. Overall, the recovery in the crypto space stalled at the end of March after prices soared to the highest levels not seen since January.
Even crypto’s fear and greed index, an indicator used to measure crypto’s mood, turned to ‘extreme fear’ last week, falling from 37 to 22. The index measures data from one to 100, and the higher the data, the more greedy and receptive there is. Low data points to fear and more sales in the market.
Some analysts point to $30,000 as a key level to keep an eye on Bitcoin in case there are more sales. BitMEX co-founder Arthur Hayes says a drop to $30,000 by June is possible. In a blog post, Hayes states:
There are many crypto market experts who believe the worst is over. I believe they are ignoring the inconvenient truth. Bitcoin and Ethereum continue to mirror tech stocks and the upcoming cycle of aggressive tightening, but keeping a close eye on risk sentiment in the market due to the Federal Reserve.
Is Bitcoin on its way to 30 thousand dollars?
22V ResearchTechnical analyst John Roque, technical analysis also suggests that Bitcoin could test $35,000. “We continue to believe it will hit $30,000,” Roque said in a note. Strategists make the following assessment:
Our analysis continues to suggest that this renewed sensitivity to market risks and the possibility of stronger declines is due to a loaded macroeconomic environment, not a lack of confidence in BTC. On-chain activity remains fairly quiet, indicating little growth in the user base and minimal influx of new requests, and the market is largely dominated by HODLers.
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