Gold Price Forecast: XAU/USD bulls could target $1,900 amid Russia-Ukraine tensions
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UPGRADE- Gold shot to its highest level since June 2021 during the Asian session on Tuesday.
- Concerns about surging inflation, the Russia-Ukraine conflict boosted the metal.
- A stronger USD, hawkish Fed expectations did little to hinder the strong move up.
Gold attracted some dip-buying near the $1,850 area on the first day of a new week and build on the momentum through the Asian session on Tuesday. This marked the third successive day of a positive move – also the seventh in the previous eight – and pushed spot prices to the highest level since June 2021. Concerns about surging inflation continued benefitting the commodity's status as a hedge against inflation. This, along with a weaker risk tone amid fears around the Russia-Ukraine conflict, further underpinned the safe-haven precious metal.
The global risk sentiment took a hit after the US National Security Advisor Jake Sullivan warned on Friday that Russia could invade Ukraine before the end of the Winter Olympics in China on February 20. That said, Russia's Foreign Minister Sergey Lavrov eased worries and suggested continuing along the diplomatic path in an effort to extract security guarantees from the West. Lavrov told President Vladimir Putin that the United States had put forward concrete proposals on reducing military risks and that there was always a chance for agreement.
Bulls, however, seemed unaffected by signs of stability in the equity markets and even shrugged off the overnight US dollar strength, which tends to undermine the dollar-denominated commodity. The greenback continued drawing support from expectations that the Fed would adopt an aggressive policy response to combat high inflation. In fact, the markets have been pricing in a 50 bps rate hike in March. The bets were reinforced by comments from St. Louis Fed President James Bullard, who reiterated calls for a faster pace of interest rate hikes.
Hence, investors now await the release of the US Producer Price Index (PPI) for January, due later during the North American session this Tuesday. Apart from this, the focus will be on the minutes of the FOMC January monetary policy meeting, scheduled for release on Wednesday. This might influence expectations about the next policy move by the US central bank and provide some meaningful impetus to the non-yielding gold. Market participants will further take cues from geopolitical developments, which will continue to play a key role in driving the broader market risk sentiment and demand for the safe-haven XAU/USD.
Technical outlook
From a technical perspective, the overnight positive move confirmed a near-term bullish breakout through a downward sloping trend-line extending from June 2021 swing high. The subsequent price action validates the constructive outlook and supports prospects for a further near-term appreciating move. Hence, some follow-through strength towards an intermediate resistance near the $1,888 area, en-route the $1,900 mark, remains a distinct possibility. That said, RSI on the daily chart has moved on the verge of breaking into the overbought territory and warrants some caution for aggressive bullish traders.
On the flip side, the $1,868-$1,867 region now seems to protect the immediate downside ahead of the descending trend-line resistance breakpoint, around the $1,858 area. Any further decline would now be seen as a buying opportunity and is more likely to remain limited near the $1,850-$1,848 horizontal zone. A convincing break below the latter might trigger some long-unwinding trade and accelerate the corrective pullback towards the next relevant support near the $1,832-$1,830 region.
- Gold shot to its highest level since June 2021 during the Asian session on Tuesday.
- Concerns about surging inflation, the Russia-Ukraine conflict boosted the metal.
- A stronger USD, hawkish Fed expectations did little to hinder the strong move up.
Gold attracted some dip-buying near the $1,850 area on the first day of a new week and build on the momentum through the Asian session on Tuesday. This marked the third successive day of a positive move – also the seventh in the previous eight – and pushed spot prices to the highest level since June 2021. Concerns about surging inflation continued benefitting the commodity's status as a hedge against inflation. This, along with a weaker risk tone amid fears around the Russia-Ukraine conflict, further underpinned the safe-haven precious metal.
The global risk sentiment took a hit after the US National Security Advisor Jake Sullivan warned on Friday that Russia could invade Ukraine before the end of the Winter Olympics in China on February 20. That said, Russia's Foreign Minister Sergey Lavrov eased worries and suggested continuing along the diplomatic path in an effort to extract security guarantees from the West. Lavrov told President Vladimir Putin that the United States had put forward concrete proposals on reducing military risks and that there was always a chance for agreement.
Bulls, however, seemed unaffected by signs of stability in the equity markets and even shrugged off the overnight US dollar strength, which tends to undermine the dollar-denominated commodity. The greenback continued drawing support from expectations that the Fed would adopt an aggressive policy response to combat high inflation. In fact, the markets have been pricing in a 50 bps rate hike in March. The bets were reinforced by comments from St. Louis Fed President James Bullard, who reiterated calls for a faster pace of interest rate hikes.
Hence, investors now await the release of the US Producer Price Index (PPI) for January, due later during the North American session this Tuesday. Apart from this, the focus will be on the minutes of the FOMC January monetary policy meeting, scheduled for release on Wednesday. This might influence expectations about the next policy move by the US central bank and provide some meaningful impetus to the non-yielding gold. Market participants will further take cues from geopolitical developments, which will continue to play a key role in driving the broader market risk sentiment and demand for the safe-haven XAU/USD.
Technical outlook
From a technical perspective, the overnight positive move confirmed a near-term bullish breakout through a downward sloping trend-line extending from June 2021 swing high. The subsequent price action validates the constructive outlook and supports prospects for a further near-term appreciating move. Hence, some follow-through strength towards an intermediate resistance near the $1,888 area, en-route the $1,900 mark, remains a distinct possibility. That said, RSI on the daily chart has moved on the verge of breaking into the overbought territory and warrants some caution for aggressive bullish traders.
On the flip side, the $1,868-$1,867 region now seems to protect the immediate downside ahead of the descending trend-line resistance breakpoint, around the $1,858 area. Any further decline would now be seen as a buying opportunity and is more likely to remain limited near the $1,850-$1,848 horizontal zone. A convincing break below the latter might trigger some long-unwinding trade and accelerate the corrective pullback towards the next relevant support near the $1,832-$1,830 region.
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