Gold Price Forecast: XAU/USD flat-lined near $1,935 area, Ukraine crisis favours bulls

Update: Gold seesawed between tepid gains/minor losses heading into the European session and was last seen trading in the neutral territory, around the $1,935-$1,936 region. The XAU/USD gained some traction during the early part of the trading on Friday and shot to a fresh weekly high, near the $1,950-$1,951 area amid the worsening situation in Ukraine. In the latest developments, reports indicated that Russian troops are shelling Europe's largest nuclear power plant in Ukraine. This triggered a fresh wave of the global risk aversion trade and benefitted the safe-haven precious metal.

The risk sentiment, however, stabilized after the International Atomic Energy reported that there has been no change reported in radiation levels at the Zaporizhzhia nuclear power plant site. Adding to this, Ukraine's emergency services said that the fire at the nuclear plant has been extinguished. This, in turn, acted as a headwind for gold. Apart from this, stronger US dollar further contributed to keeping a lid on any meaningful upside for the dollar-denominated commodity, at least for now.

That said, the risk of a further escalation in the Russia-Ukraine war kept investors on edge. This, in turn, might continue to lend some support to gold prices and help limit any meaningful corrective slide. Hence, the focus remains glued to the incoming headlines surrounding the Russia-Ukraine saga. Apart from this, traders on Friday will also take cues from the release of the US monthly jobs report, popularly known as NFP, due later during the early North American session.

Previous update: Having refreshed the weekly top before a few hours, gold (XAU/USD) buyers keep reins around $1,940 during early Friday morning in Europe.

The yellow metal’s latest run-up could be linked to Russia’s shelling on Ukraine’s nuclear power plant in Zaporizhzhia, one of the largest in Europe. Even if the radiation fears were turned down and the fire-safety team took control of the matters, Moscow’s recent actions pour cold water on the Russia-Ukraine peace talks that agreed on the safe passage of Kyiv’s civilians the previous day.

On the same line were headlines from the UK Times suggesting that Ukraine’s President Volodymyr Zelensky survives three assassination attempts in days.

Elsewhere, Fed Chair Jerome Powell reiterated his support for a 0.25% rate hike, actually showed readiness for a 0.50% rate-lift in the March meeting, during the second round testimony the previous day. While portraying the market implications from Powell’s comments, CME’s FedWatch Tool marks around 89% odds favoring the same rate-lift in the next month’s Fed meeting. The same adds to the importance of today’s US jobs report for February.

Talking about the data, US ISM Services PMI eased for the third consecutive month in its latest release but the second-tier job data and Factory Orders came in positive on Thursday.

While portraying the mood, S&P 500 Futures drop around 1.0% on a day whereas the US 10-year Treasury yields mark near six pips of a downside to 1.78% by the press time. Further, the US Dollar Index (DXY) eases after refreshing the 2022 peak while WTI crude oil also consolidates daily gains near $110.00 after initially rising to $112.81.

That said, geopolitical headlines will keep the driver’s seat for gold prices, suggesting more upside, while the US Nonfarm Payrolls, expected 400K versus 467K prior, will be crucial to watch as well.

Technical analysis

Gold pierces the upper line of a one-week-old bullish pennant chart formation, backed by the receding bearish bias of MACD and firmer RSI line.

As a result, the bulls are on the way to refresh the multi-day top marked the last week around $1,975.

Following that, the 61.8% Fibonacci Expansion (FE) of the metal’s moves during January and February of 2022, near the $2,000 psychological magnet, will lure the XAU/USD bulls before directing them to theoretical target of $2,035.

Alternatively, pullback moves remain elusive until breaking an immediate support line from February 24, near $1,910.

Even so, a six-week-old ascending trend line, near $1,880, will challenge the gold bears.

It should be noted that a convergence of the 200-SMA and 61.8% Fibonacci retracement of January-February upside, close to $1,855, appears a tough nut to crack for the XAU/USD bears.

Gold: Four-hour chart

Trend: Further upside expected