Gold Price Forecast: XAU/USD bears look to $1,830's in the hopes that a Russian invasion will be averted

Update: The price of gold has fallen on Tuesday as risk appetite picks up after Russia said it had withdrawn some of its troops from the Ukraine border. 

All three major indexes are sharply higher, with the CBOE market volatility index (VIX) falling from a three-week high also. The pivot in fundamentals was perfect timing with respect to the prior analysis in the gold price from Monday's trade as follows: 

There is room to go until the $1,830's at this juncture, depending on the outcome of diplomatic meetings and telephone calls between world leaders and their communication with the media. In this regard, 
President Joe Biden gives brief remarks providing an update on Russia and Ukraine which can be watched live here:

If diplomacy prevails and when the Russian risk premium is removed from the gold market, ultimately, gold prices are likely to succumb to the substantially higher real rates amid a hawkish regime at the Federal Reserve. This will open the risk of a deeper move towards the $1,800's again with $1,780's eyed as the next potential daily support. 

End of update

Gold (XAU/USD) plunges $20 during the North American session as Russia/Ukraine conflict tensions ease a tone as investors move from the non-yielding metals towards riskier assets. At the time of writing, XAU/USD is trading at $1849.25.

Eastern Europe geopolitical tensions subside

As portrayed by European and US equities rise, the market sentiment remains positive, as easter Europe tension abate some after German chancellor Olaf Scholz met with Russian President Vladimir Putin. Putin told reporters that talks with Scholz were businesslike. 

The reunion happened after the US warned of a possible Russian attack on Ukraine, as the US press said an invasion was “imminent.” Meanwhile, officials in Moscow repeatedly denied the aforementioned. Moreover, updates crossing the wires that some Russian troops are returning to the base weighed on the safe-haven status of Gold.

Putting geopolitical matters aside, factors like the Federal Reserve tightening keep the non-yielding metal under selling pressure. On Monday, St. Louis President James Bullard reiterated his view that the US central bank would need to hike 100 bps by the July meeting. Also, he emphasized that the balance sheet reduction could begin in Q2 and wants discussions to get underway.

US hot fees paid per producer increases the odds of a bigger rate hike

On Tuesday, the Department of Labor reported that prices paid by producers for January were unchanged in line with the previous month, increasing by 9.7% y/y, higher than the 9,1%, though unchanged vs. the December number. The so-called Core PPI rose to 8.3% y/y, two tenths lower than December’s but higher than 7.9% foreseen.

In the meantime, the US 10-year Treasury yield advances five basis points sits at 2.04%, weighs on the non-yielding metal, which fell from daily tops around $1,877 down to $1,849 a $24 in a matter of hours. Worth noting that the 10-year TIPS, a proxy for real yields, sits at -0.45%, one basis point down.

XAU/USD Price Forecast: Technical outlook

On Tuesday, the XAU/USD free-fall helped USD bulls to reclaim under a nine-month-old trendline, broken two days ago and pushed under the mid-line between the top-central Pitchfork’s uptrend channel. That said, the confluence of both trendlines around the $1,855-60 range would be resistance, that in the event of being broken, could exacerbate a move towards $1,900. A break of the former would expose November 16, 2021, a daily high at $1,877.14, followed by the latter $1,900.

However, despite that XAU/USD is upward biased, the $20 drop appears to be a profit-taking move unless USD bulls push for a daily close under the January 25 $1,853.88 daily high. In that event, the first support would be July 15, 2021, high at $1,834, followed by the mid-line between the bottom-central Pitchfork’s channel at $1,815-20 area.