Gold Price Forecast: XAU/USD drops half a percent to $1,970 on cautious optimism over Ukraine crisis

Update: Gold (XAU/USD) extends Friday’s downbeat performance as sellers attack $1,970 during the initial hours of Monday’s Asian session.

The yellow metal’s recent losses could be linked to the increased hopes of a Ukraine-Russia ceasefire, as well as easing differences between the US and China.

During the weekend, Reuters confirmed upbeat developments on the Moscow-Kyiv talks, following the positive updates from negotiations between Russia and Ukraine by Russian President Vladimir Putin on Friday. Also positive was the news from Bloomberg that diplomats from the US and China will meet for the first time in person since the Ukraine-Russia crisis began on Monday.

It’s worth mentioning that chatters surrounding Russian prosecutors’ warnings to the West and Pentagon's press secretary John Kirby’s comments suggesting Russian forces are "broadening their target sets" keep the XAU/USD buyers hopeful.

Amid these plays, S&P 500 Futures rise 0.80% intraday whereas the US 10-year Treasury yields add four basis points (bps) to 2.046% by the press time.

Moving on, gold traders will keep their eyes on the Ukraine developments whereas talks surrounding the Fed’s monetary policy meeting will also be crucial amid hopes of a 0.50% rate hike.

End of update.

Gold (XAU/USD) is likely to juggle on Monday as broader risk-off impulse may provide tailwinds on the downside while upside gains will remain capped on a likely hawkish stance this week. The odds of an interest rate hike decision by the Federal Reserve (Fed) are very much lucrative; however, the concept that will hold the nerves of investors will be the extent of the interest rate hike.

Gold prices are getting mixed cues from the Russia-Ukraine war headlines. At once, U.S. Deputy Secretary of State Wendy Sherman said Russia was showing signs of willingness to engage in substantive negotiations about ending a conflict on Sunday. While, on the risk-off impulse side, Russian missiles attack on large Ukrainian base near the border with NATO member Poland escalated fears of third world war.

Therefore, the Russia-Ukraine war headlines will remain a mixed bag for the precious metal so investors will focus on likely monetary policy action by the Fed this week. Russia's invasion of Ukraine has put forward a tedious job for the central banks. The cues from the US Consumer Price Index (CPI) dictate a 50 basis point (bps) interest rate decision from the Fed on a print of 7.9% without considering the impact of higher oil prices. While the intensifying fears of stagflation claim a modest hawkish stance from the Fed.

Gold Technical Analysis

On an hourly scale, XAU/USD is auctioning in a falling channel that signals for a lackluster move with a negative bias. The precious metal has sensed support near 200-period Exponential Moving Average (EMA) at $1,975.40. The Relative Strength Index (RSI) (14) is oscillating in a range of 40.00-60.00, which signals a back and forth movement in the precious metal ahead.

Gold hourly chart