Gold Price Forecast: XAU/USD eyes 21-DMA on road to recovery, Ukraine crisis, Powel in focus

Gold stages a modest bounce after booking a 3.4% weekly loss on the hawkish Fed.
Ukraine crisis intensifies, derails diplomacy hopes, aiding gold price.
Daily technical setup suggests recapturing 21-DMA is critical for further upside.

Dhwani Mehta FXStreet

After booking a 3.4% weekly loss, gold price has kicked off a new week on the right footing, as it attempts a tepid bounce towards $1,950. Traders are cautious, as risk-aversion persists amid escalating Russia-Ukraine war and failed US-Sino talks. Investors also digest Friday’s hawkish Fedspeak that followed a 0.25% lift-off earlier in the week.

The main focus this week remains on hopes for a truce on the Ukraine crisis, Fed Chair Powell’s speech and the preliminary Business PMI reports from both sides of the Atlantic, which will likely hint at a likely recession in the euro area. Also, US President Joe Biden’s meeting with the NATIO leaders this Monday will be closely eyed. The market’s perception of risk on incoming headlines concerning the Russia-Ukraine saga will remain the main market driver, influencing the US dollar as well as gold trades.

Over the weekend, tensions over the Ukrainian port city of Mariupol intensified, pouring cold water on the diplomacy optimism seen in the previous week. Ukraine rejected a Russian demand to surrender of the embattled Mariupol.

On Friday, two of Fed's most hawkish policymakers, Waller and Barkin said the central bank needs to take more aggressive steps to combat inflation. The hawkish Fed’s outlook offered confidence to the markets in the US economic growth prospects, which was one of the key factors that weighed on gold price.

Separately, the scheduled call between US President Joe Biden and his Chinese counterpart Xi Jinping failed to deliver any substantial results, with President Biden warning Xi of consequences if Beijing supported Russia’s invasion of Ukraine.

Gold Price Chart - Technical outlook

Gold: Daily chart

As observed on the daily chart, with the 14-day Relative Strength Index (RSI) defending the midline, gold price has managed to hold above the one-month-old rising trendline support, now at $1,917.

If the recovery momentum extends, then gold bulls will need a daily closing above the upward-sloping 21-Daily Moving Average (DMA) at $1,943 to flex their muscles.

Further up, the $1,950 supply zone could be challenged en-route the previous year’s high of $1,960.

The February highs of $1,975 will be next on buyers’ radars.

On the downside, if the above-mentioned critical support line is taken out on a daily closing basis, then a test of the March lows of $1,901 will be inevitable.

The next strong support zone is seen near $1,880, which is the confluence of the February 24 low and ascending 50-DMA.

Author

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

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