Gold Price Forecast: XAU/USD bulls await ascending channel breakout amid Ukraine crisis
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UNLOCK OFFER- Gold jumped to a fresh multi-week high following the release of the US CPI report on Tuesday.
- Sustained USD buying kept a lid on any further gains for the dollar-denominated commodity.
- The Ukraine crisis acted as a tailwind for the safe-haven metal and helped limit the downside.
Gold built on its recent bounce from sub-$1,900 levels, or the one-month low touched on March 29 and shot to a fresh four-week high on Tuesday. The intraday move up followed the release of the US consumer inflation figures, which showed no signs of easing and boosted the metal's appeal as a hedge against rising prices. In fact, the headline US CPI accelerated to levels last seen in 1981 and came in at 8.5% YoY in March, up from 7.9% previous. Conversely, the core CPI - excluding food and energy prices - eased for the second straight month and forced investors to scale back expectations for a more aggressive policy tightening. This, in turn, triggered a sharp pullback in the US Treasury bond yields, which prompted some intraday US dollar selling and offered additional support to the non-yielding yellow metal.
The post-CPI USD downtick, however, turned out to be short-lived and was quickly bought into after Fed Governor Lael Brainard said that the central bank will stay the course on hiking interest rates. In an interview with the Wall Street Journal, Brainard emphasized that the central bank is still proceeding with a series of interest rate hikes, as well as an effort to trim its balance sheet. The hawkish remarks pushed the USD Index to its highest level since May 2020 and kept a lid on any meaningful upside for the dollar-denominated commodity. Nevertheless, spot gold settled in the green and held steady near the $1,970 through the Asian session on Wednesday. Investors remain concerned about the potential economic fallout from the Ukraine crisis, which, in turn, continued lending some support to the safe-haven XAU/USD.
In the latest developments, Russian President Vladimir Putin said on Tuesday that talks with Ukraine are at a dead-end. Putin further added that Ukraine has deviated from the agreements achieved at talks in Istanbul. This dashed hopes for a diplomatic solution to end the war in Ukraine and benefitted traditional safe-haven assets. That said, modest rebound in the US Treasury bond yields should inspire the USD bulls and cap gains for gold. Market participants now look forward to the release of the US Producer Price Index for some impetus later during the early North American session. Apart from this, the incoming geopolitical headlines will be looked upon to grab some short-term trading opportunities around the metal.
Technical outlook
From a technical perspective, the overnight move up stalled near the top end of an ascending channel extending from sub-$1,900 levels. The said barrier, currently around the $1,979-$1,980 region, should now act as a pivotal point for short-term traders, which if cleared decisively will set the stage for additional gains. Gold could then accelerate the momentum and aim back to reclaim the key $2,000 psychological mark.
On the flip side, the $1,960-$1,959 region now seems to protect the immediate downside, below which the XAU/USD could slide back to test the ascending channel support, around the $1,935 zone. A convincing break below will shift the bias back in favour of bearish traders and make gold vulnerable to decline further towards the $1,918 intermediate support en-route the $1,900 mark.
- Gold jumped to a fresh multi-week high following the release of the US CPI report on Tuesday.
- Sustained USD buying kept a lid on any further gains for the dollar-denominated commodity.
- The Ukraine crisis acted as a tailwind for the safe-haven metal and helped limit the downside.
Gold built on its recent bounce from sub-$1,900 levels, or the one-month low touched on March 29 and shot to a fresh four-week high on Tuesday. The intraday move up followed the release of the US consumer inflation figures, which showed no signs of easing and boosted the metal's appeal as a hedge against rising prices. In fact, the headline US CPI accelerated to levels last seen in 1981 and came in at 8.5% YoY in March, up from 7.9% previous. Conversely, the core CPI - excluding food and energy prices - eased for the second straight month and forced investors to scale back expectations for a more aggressive policy tightening. This, in turn, triggered a sharp pullback in the US Treasury bond yields, which prompted some intraday US dollar selling and offered additional support to the non-yielding yellow metal.
The post-CPI USD downtick, however, turned out to be short-lived and was quickly bought into after Fed Governor Lael Brainard said that the central bank will stay the course on hiking interest rates. In an interview with the Wall Street Journal, Brainard emphasized that the central bank is still proceeding with a series of interest rate hikes, as well as an effort to trim its balance sheet. The hawkish remarks pushed the USD Index to its highest level since May 2020 and kept a lid on any meaningful upside for the dollar-denominated commodity. Nevertheless, spot gold settled in the green and held steady near the $1,970 through the Asian session on Wednesday. Investors remain concerned about the potential economic fallout from the Ukraine crisis, which, in turn, continued lending some support to the safe-haven XAU/USD.
In the latest developments, Russian President Vladimir Putin said on Tuesday that talks with Ukraine are at a dead-end. Putin further added that Ukraine has deviated from the agreements achieved at talks in Istanbul. This dashed hopes for a diplomatic solution to end the war in Ukraine and benefitted traditional safe-haven assets. That said, modest rebound in the US Treasury bond yields should inspire the USD bulls and cap gains for gold. Market participants now look forward to the release of the US Producer Price Index for some impetus later during the early North American session. Apart from this, the incoming geopolitical headlines will be looked upon to grab some short-term trading opportunities around the metal.
Technical outlook
From a technical perspective, the overnight move up stalled near the top end of an ascending channel extending from sub-$1,900 levels. The said barrier, currently around the $1,979-$1,980 region, should now act as a pivotal point for short-term traders, which if cleared decisively will set the stage for additional gains. Gold could then accelerate the momentum and aim back to reclaim the key $2,000 psychological mark.
On the flip side, the $1,960-$1,959 region now seems to protect the immediate downside, below which the XAU/USD could slide back to test the ascending channel support, around the $1,935 zone. A convincing break below will shift the bias back in favour of bearish traders and make gold vulnerable to decline further towards the $1,918 intermediate support en-route the $1,900 mark.
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