Gold Price Forecast: XAU/USD could recapture $1,900 amid heightened geological tensions

Gold price is building on Wednesday’s impressive rebound from the $1,850 level, now challenging the three-month highs at $1,880 following a sudden risk-aversion wave that shook-off markets. Russian media outlets reported that the Ukrainian armed forces fired mortars and grenades in four Luhansk People's Republic (LPR) localities, which is located in the Donbas region, internationally recognized to be a part of Ukraine but run by Russian-backed separatists. Risks that the escalation of the years-long conflict with Donbass separatists could intensify the tension between Russia and the West spooked investors, as a flight to safety returned with full force, boosting the demand for gold, US dollar and the Treasuries. However, the rebound the dollar was partly set off by the falling Treasury yields, helping keep the bullish undertone intact around the bright metal.

Gold price also continues to find support from Wednesday’s FOMC minutes for the January meeting, which was read as less hawkish, as it failed to provide any hints on a 50-basis points rate hike in March. Meanwhile, no signals on aggressive rate increases by the Fed this in its minutes also disappointed the hawks, which added to the dollar’s misery a day before. The USD bulls failed to find any comfort from the stunning US Retail Sales data, which arrived at 3.8% MoM in January, beating expectations of +2.0%. The US administration’s refusal to believe the Russian claims of troops withdrawal also kept the tensions elevated, which support gold bids.                                                        

Gold Price Chart - Technical outlook

Gold: Daily chart

Gold price is flirting with the multi-month high level of $1,880, biding time to make a big break higher. The next upside target is envisioned at $1,900, the level unseen since June 2021. Further up, the June 1 high of $1,917 will be put to test once again.

The 14-day Relative Strength Index (RSI) holds well within the bullish territory, keeping the bullish potential intact. Alternatively, any retracement from higher levels will challenge the daily lows of $1,868 first before extending the downside towards the $1,850 psychological barrier. The next cushion awaits at Tuesday’s low of $1,845.