Russian Military Action in Ukraine Fuels Gold Surge

April Gold futures surged to a four-month high as the military action by Russia against the Ukraine boosted demand for the precious metal as a safe haven asset. The rally through the last swing top at $1345.60 reaffirmed the main trend on the daily chart while creating a new swing bottom at $1319.30. A trade through this level will turn the main trend to up. The next possible upside target is $1361.10.

Some traders feel the rally in gold is just a knee-jerk reaction to the occupation of Crimea by the Russian army and that it is not likely to last. This may be the case, but no one can predict at this time how long the occupation is going to last. At the same time, some of the buying may be related to hedging because of the possibility of a break in the equity indices.

Increased tensions between Russia and Ukraine sent April Crude Oil futures soaring on Monday. The fear of supply disruptions was the catalyst behind the rally. Technically, the market may be overbought, but the chart pattern suggest there is still some room to the upside. The daily chart indicates there is room to rally to $107.66 to $110.00.

The military action by Russia against Ukraine also gave EUR/USD traders an excuse to lighten up on the long side following last week’s late surge. Some traders also pared positions ahead of this week’s European Central Bank meeting. The fear is the ECB is set to implement one more round of stimulus despite the latest steady inflation data.

The flight to safety rally into the U.S. Dollar also helped pressure the British Pound. Uncertainty ahead of the Bank of England policy meeting this week also gave investors an excuse to pare positions.

Also in the news but not having much of an effect on trading because of the Ukraine crisis was the U.S. ISM Manufacturing PMI at 53.2. Traders were looking for 52.3.

Traders should look for increased volatility this week because of the crisis in Ukraine.