Gold Price Forecast: XAU/USD pauses on the way to $1,975, Ukraine in focus

Gold (XAU/USD) traders portray the market’s indecision around $1,925 heading into Thursday’s European session.

The yellow metal took a U-turn from a weekly high to print the biggest daily loss in a fortnight the previous day as market sentiment improved amid hopes of ceasefire talks between Russia and Ukraine. However, cautious mood ahead of the stated negotiations and increasing odds of a faster pace of Fed’s rate-hike seem to restrict the metal’s latest moves.

Russian media shared news of a probable meeting today, with a ceasefire on the table. However, the latest confirmation from Ukrainian authorities that the Moscow military captured southern city Kherson seems to challenge the peace talks.

Also negative for the market sentiment is the rating downgrade of Russia by global rating agencies like Moody’s and Fitch, not to forget the economic fallout from Moscow’s invasion of Kyiv.

The geopolitical risks also hike the inflation woes and push Fed Chair Powell to suggest faster rate lifts, to the tune of 0.50% if needed. The same propelled inflation expectations and probabilities of such an action in March, as portrayed by CME’s FedWatch Tool and the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data.

Amid these plays, S&P 500 Futures print mild gains but the US 10-year Treasury yields remain sluggish even as Wall Street ran the show of optimism on Wednesday. The cautious mood, however, keeps the US Dollar Index (DXY) firmer.

Moving on, the US ISM Services PMI, Factory Orders, Nonfarm Productivity, etc. will join the second version of Fed Chair Powell’s testimony to entertain traders. However, Russia-Ukraine headlines will be crucial for the near-term direction.

Technical analysis

Despite the latest inaction, gold remains above the 10-month-old horizontal area amid the broad rush to risk safety.

The bullish MACD signals and sustained trading beyond the monthly support line also add strength to the upside bias.

However, the overbought RSI line hints at a pullback, which in turn highlights a horizontal line stretched from September 2020, surrounding $1,975.

Gold: Daily chart

Should XAU/USD bulls remain dominant past $1,975, the $2,000 psychological magnet, also the 61.8% Fibonacci Expansion (FE) of January-February moves, will be in focus ahead of the year 2020 peak of $2,075.

Gold: Four-hour chart

Meanwhile, the aforementioned support zone from June 2021, around $1,915-12, puts a floor under the gold prices during a pullback, a break of which will highlight a 12-day-old support line, close to $1,900 by the press time.

Following that, the one-month-old rising trend line and November 2021 peak, respectively around $1,890 and $1,877, will challenge the gold sellers before the last defense for short-term buyers, namely the 21-DMA level of $1,870.