Gold Price Forecast: XAU/USD tests key support below $2,000 as US escalates pressure on Russia

Update: Gold (XAU/USD) refreshes intraday low around $1,985 as bears attack a two-week-old ascending support line during early Friday morning in Europe.

In doing so, the yellow metal struggles to cheer the risk-off mood as hopes of faster monetary policy normalization direct traders towards the US dollar. The greenback rallied the most in a week the previous day after the US Consumer Price Index (CPI) refreshed its 40-year high while matching the 7.9% YoY forecast for February.

Elsewhere, market sentiment weakens as the US pushes to end Russia’s preferred trade status and economic aid package for Ukraine join Moscow’s request for an emergency United Nations (UN) Security Council meeting to discuss the usage of chemical or biological weapons in the Ukraine war. Additionally, the recent airstrike in the far West of Ukraine also weigh on the risk appetite and challenge gold buyers, by way of firmer USD.

It’s worth noting, however, that a lack of major data/events tests the US Dollar Index (DXY) buyers of late, which in turn restrict immediate XAU/USD moves.

End of update.

Gold (XAU/USD) attracted some significant offers from $2,060.54 on Tuesday as the expectations of a ceasefire between Russia and Ukraine spurted after Ukrainian President Volodymyr Zelenskyy agrees to a softer tone on membership in NATO. However, the risk appetite turned short-lived and gold prices found grounds around $1,975.00 after the peace talks between Moscow and Kyiv yielded no positive progress on steadfast Russian demand for a Ukrainian surrender.

Negotiations in Turkey drove the situation back to square after the Kremlin escalated its demand to a ‘surrender’ from Ukraine against a halt on Russian military activity in Kyiv. A statement came from Ukraine’s Foreign Minister Dmytro Kuleba post the peace talks that "Russia is not in a position at this point to establish a cease-fire. They seek surrender from Ukraine. This is not what they're going to get,"

Meanwhile, the Ukrainian parliament says Russian forces attacked a Kharkiv institute that contains an experimental nuclear reactor. This has refreshed the fears of a nuclear attack by Russia.

On the dollar front, the US dollar index (DXY) is following the footprints of the precious metal after investors underpinned the risk-aversion theme on renewed geopolitical fears. The DXY is setting above 98.50 on geopolitical jitters and skyscraper US inflation print. The US Consumer Price Index (CPI), which was in line with the estimate of 7.9% but well above the prior record of 7.5%, has failed to pose a serious carnage in the gold prices. While the 10-year US Treasury yields have tapped 2% on rising expectations of a 50-basis point (bps) interest rate hike by the Federal Reserve.

Going forward, the headlines from the Russia-Ukraine war will continue to keep investors on their toes. Apart from that, investors will also focus on the Michigan Consumer Sentiment Index, which is due n Friday.

Gold Technical Analysis

On an hourly scale, XAU/USD has reversed to the upside after sensing support from February 24 high at 1,954.28. The 200-period Exponential Moving Average near $1,973.00 will act as major support for the precious metal. The Relative Strength Index (RSI) (14) has shifted its range from 20.00-40.00 to 40.00-60.00, which indicates a consolidation ahead. The trendline placed from March 8 high at $2,060.54 will act as a major barricade going forward.

Gold hourly chart