- Gold holds steady above a demand area on the charts as the focus stays on Ukraine-Russia risk.
- In the background, the Fed is a driver for gold prices and US NFP will be eyed this week.
Gold is holding near last week’s lows in the open as markets weigh up the weekend headlines surrounding the Ukraine-Russia crisis. On the one hand, Russia’s President, Vladimir Putin, put nuclear forces on high alert over the weekend, escalating tensions, but on the other hand, there are reports of a peace talk in the offing. Consequently, financial markets are mixed at the open with large gaps in forex being filled.
Western powers’ moves to cut some Russian banks from the SWIFT global payments system and freeze the Bank of Russia’s reserves have antagonised the Russian president. Putin said he was giving the nuclear readiness order because “top officials in NATO’s leading countries have been making aggressive statements against our country,” according to a report from Russian state news operator TASS.
Meanwhile, Ukrainian President Volodymyr Zelensky confirmed to Sky News that the two sides would hold the talks on the border of Ukraine and Belarus, where some of the Russian troops invading his country had been held.
Zelensky had refused to agree to an earlier request for talks in Belarus, arguing it was not neutral territory. Sky News, referring to a statement from Zelensky’s office, said the two delegations will meet “without preconditions” near the Pripyat River.
The Russia risk premium has overwhelmingly contributed to the rise in gold prices from the start of February, analysts at TD Securities explained. ”The Russia risk premium has catalyzed a breakout from the wedge pattern, bringing in some chartist demand, and sparking a substantial CTA buying program which is supporting prices today. This rolling series of events have culminated in the strong price action.”
Looking forward, however, the analysts argued that the crushing weight of a hawkish Fed will ultimately sap appetite for precious metals, which should argue for lower prices as safe-haven flows reverse. ”Without sustained buying behaviour, gold prices are unlikely to remain in an uptrend, particularly as real rates rise sharply amid dual tightening via hikes and quantitative tightening.”
However, rising tensions in Ukraine have recently fueled expectations that the Fed may be less aggressive in tightening policy as it attempts to rein in inflation. Expectations for at least a 50-basis-point interest rate hike at its March meeting have fallen to 25% from around 34% a day ago, according to CME’s Fedwatch.
In this regard, the data at the end of the week will be important. The US Nonfarm Payrolls report likely continued to recover in February following an unexpectedly strong Jan report—despite the Omicron-led surge in COVID cases, analysts at TD securities aid.
”We expect some of that boost to fizzle, though to still firm job growth pace. Seasonal adjustments were a factor last month and they will likely play a role again in Feb. We expect wage growth to slow to a still strong 0.5% m/m pace.”
Gold technical analysis
The price is testing a key daily support area that guards risk to below $1,844, However, should the bulls commit at this juncture, an upside continuation would be expected for the near future.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Please Note: Goldtrends.net post this article as a means of providing the latest news relating to gold investment. The posting of this article does not necessarily relate to our views, and should not be seen as advice or guidance. Always consult a financial advisor before making any investment choices.