Gold Price Forecast: XAU/USD pares intraday gains, holds above $1,900 amid Russia-Ukraine war

Update: Gold slipped below the $1,900 mark during the early part of the European session and filled a major part of its bullish gap opening on Monday, though bulls managed to defend the 200-hour SMA. The incoming headlines surrounding the Ukraine crisis continued weighing on investors' sentiment, which, in turn, acted as a tailwind for the safe-haven XAU/USD. In the latest development, Western nations ramped up efforts to punish Russia for its invasion of Ukraine and imposed tough new sanctions, including cutting some of its banks off the SWIFT financial network. Russian President Vladimir Putin upped the ante on Sunday and put the country’s strategic nuclear forces on high alert.

The market nervousness, however, eased a bit after the Russian negotiator said that they are interested to reach an agreement with Ukraine as soon as possible. In fact, the Ukraine-Russia talks have reportedly started in Belarus and expectations for a likely ceasefire led to modest recovery in the equity markets. This was seen as a key factor that exerted some intraday downward pressure on gold. That said, the emergence of fresh US dollar selling at higher levels helped limit any meaningful slide for the dollar-denominated commodity. Nevertheless, the XAU/USD, so far, has managed to hold just above the $1,900 mark as the market focus remains on the Russia-Ukraine saga.

Previous update: Gold (XAU/USD) defends the week-start gap-up around $1,905, up 0.80% intraday amid the rush to risk-safety during Monday’s Asian session.

The yellow metal snapped a three-week uptrend even after rising to July 2021 high. However, the weekend headlines concerning the Russia-Ukraine tussles amplified the risk-off mood and portrayed an upside gap as the NFP week begins.

Among the latest headlines, the UK Times’ report suggesting Russia ordered 400 mercenaries “to assassinate (Ukraine) President Zelenskyy and his government and prepare the ground for Moscow to take control,” gain major attention. Also important were the comments from European Commission President Ursula von der Leyen who said to the EU News that the European Union (EU) wants Ukraine in the bloc while also adding, “They’re one of us.”

The weekend headlines were rather mixed as the West levied harsh sanctions on Moscow but President Vladimir didn’t step back and put nuclear arsenal on high alert, raising fears of a nuclear war. On the same line are the latest headlines from Belarus that the nation wants to renounce its non-nuclear neutral status. However, both the nation’s readiness for negotiations trigger the ray of hope.

While portraying the mood, the US Dollar Index (DXY) extends a three-week uptrend while the US 10-year Treasury yields print six basis points (bps) of a daily downside to 1.90% at the latest. Further, stocks in Asia-Pacific are also in the red whereas the S&P 500 Futures pare drop nearly 2.50% at the latest.

Moving on, the Russia-Ukraine talks will be in focus for near-term directions while US trade numbers for January and Chicago Purchasing Managers’ Index for February may direct intraday moves. It’s worth noting that the monthly US Nonfarm Payrolls (NFP) will be crucial this week as traders slow down on their hopes of a 0.50% rate hike in March.

Technical analysis

Gold failed to provide a decisive upside break of a seven-month-old rising channel, despite marking an uptick to the September 2020 highs during the last week.

The pullback move gains support from the RSI’s retreat from the overbought territory and receding bullish bias of the MACD, which in turn challenges the recent upside moves of the XAU/USD prices.

However, the November 2021 peak of $1,877 and a three-week-long rising trend line near $1,875 restricts the bullion’s immediate downside.

Gold: Daily chart

Also acting as nearby support for gold prices is the confluence of the 100-SMA and a monthly ascending trend line near $1,865.

Meanwhile, the 50-SMA level surrounding $1,895 and the $1,900 threshold will challenge gold’s short-term recovery.

Gold: Four-hour chart

Following that, a broad resistance area between $1,911 and $1,915, comprising multiple levels marked since May 2021 and the aforementioned channel’s upper line, will be crucial for XAU/USD bull’s re-entry.

In a case where gold buyers remain dominant past-$1,965, a run-up towards January 2021 near $1,960 and the latest swing top near $1,975 can’t be ruled out.

To sum up, gold is likely to weaken further but the buyers aren’t out of the woods yet. Hence, any recovery beyond $1,915 could recall the bulls.