Failed insurrection in Russia shows how fragile the global social fabric is, which will support long-term gold prices

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The failed insurrection in Russia has exposed the fragility of the global social fabric, highlighting the importance of gold as a long-term hedge against uncertainty. Although the gold market did not experience a significant safe-haven surge following the 24-hour rebellion, analysts believe that gold will continue to serve as a crucial portfolio diversifier during times of heightened instability.

Currently trading below the psychological threshold of $1,950 per ounce, August gold futures have shown a modest 0.34% increase, reaching $1,936 an ounce.

The armed rebellion led by Yevgeny Prigozhin and his Wagner Group mercenaries came to an abrupt end as Moscow struck a deal with Prigozhin, exiling him to Belarus and offering amnesty to Wagner's professional soldiers on the condition that they stand down. Although Vladimir Putin remains in power, his control over Russia has noticeably weakened in the past 24 hours, according to political analysts.

Jeffrey Christian, managing director of CPM Group, suggests that in the short term, the failed coup could lead to some selling pressure on gold as geopolitical fears subside, reducing the metal's appeal as a safe haven. However, he emphasizes that the instability witnessed over the weekend should provide long-term support for gold.

Christian explains that there might be a further decline in gold prices as investors continue to engage in long liquidation and physical demand for gold remains weak. Additionally, interest rates and oil prices might experience a slight softening, while equities in Western markets could see a temporary rise. Nonetheless, these short-term movements are expected to be brief, as the potential implications of a future Russian government become apparent.

Christian asserts that although there may be intermittent concerns regarding the postures and actions of a new Russian government, market anxieties will likely diminish due to the realization that Russia's political and economic significance will be diminished regardless of the eventual outcome.

Regarding the insurrection itself, Christian expresses little surprise, stating that CPM Group has been predicting internal dissent in Russia for about 16 months due to Putin's mismanagement and his decision to attack Ukraine. The expectation is that Putin will be replaced, most likely by more hard-line leaders, although this change was initially anticipated after the conclusion of the war. Christian concludes that a regime change in Russia is imminent, and the events of the weekend signify an acceleration toward the end of the war against Ukraine and the emergence of a new government.

Michele Schneider, director of trading education and research at MarketGauge, views the attempted coup as evidence of the world's fragility. She anticipates an increase in geopolitical volatility as the decades-long trend of globalization weakens. Schneider believes that consumers will continue to face challenges due to rising food prices and tightening measures by the European Central Bank (ECB) and potentially the Federal Reserve, such as interest rate hikes. She suggests that the instability witnessed during the weekend is just a ripple leading up to an impending climax.

Given the current environment, Schneider advises against bearishness on gold and other raw commodities, even if their prices temporarily decline. She sees any short-term weakness in gold and silver as buying opportunities. Schneider highlights that a positive sign of the correction being over would be if gold surpasses $1,950, and breaking the $1,980 mark would indicate that $2,000 is within reach.

Schneider emphasizes the importance of monitoring the physical gold market, as it reflects the geopolitical premium in the marketplace. Investors are likely to seek physical gold as a means to safeguard their wealth.