Gold buyers pause around $2,042, down 0.40% intraday in Wednesday’s Asian session. As a result, the yellow metal is struggling to continue the recent four-day rise while remaining close to the highs seen in August 2020.
Efforts by Ukraine and Venezuela to defuse geopolitical tensions with Russia and the United States have lifted market sentiment recently. As a result, demand for the metal’s safe havens is suffering, causing the recent decline in XAU/USD prices.
The day before, AFP headlines, “By bowing to Russia, Ukraine would no longer demand NATO membership,” became the main risk driver. This news, along with the confirmation of Ukraine’s first humanitarian corridor, helps ease market fears. Venezuela’s release of a US prisoner and subsequent US indication to ease sanctions is also benefiting risk appetite while undermining gold’s appeal as a safe haven.
On the contrary, Russia might not applaud Kyiv’s decision to drop NATO membership, as Moscow might fear the country’s European Union (EU) membership, which would demolish the unspoken goal of the President Vladimir Putin to install a Kremlin-controlled ruler in Ukraine. Recently, Russia called for the nationalization of foreign companies that had closed, casting doubt on market confidence.
In terms of data, the US trade imbalance hit a new high, while small business confidence fell to its lowest level in 13 months, according to the IBD/TIPP Economic Optimism Indicator for March. In addition, China’s consumer price index (CPI) rose 0.8% above the forecast to reprint earlier statistics by 0.9%, while the producer price index (PPI) beat the market consensus of 8.7% with year-over-year figures of 8.8%, compared to 9.1% previously.
10-year US Treasury yields fell two basis points (bps) to 1.85%, while S&P 500 futures rose 0.40% later in the day.
In summary, recent mixed geopolitical concerns may pose a challenge for gold buyers, but worries about stagflation, due to the recent increase in commodity prices and the resulting economic problems, may keep buyers XAU/ USD optimistic.
Gold – XAU/USD – Technical Outlook
The previous day, gold prices broke the upper line of a six-week-old bullish channel and numerous resistances were indicated throughout the end of 2020. The overbought RSI, on the other hand, seems to have triggered the quotation fall from its all-time high of $2,075, printed in August 2020.
Given the new demand challenges for safe haven gold, as well as the MACD line’s expected decline from higher levels, gold sellers could target the prior important resistance point around $2,020. . However, if the quote falls below $2020, it is likely to break the $2000 barrier while striving for 15-day horizontal support near $1975.
Meanwhile, buyers will keep an eye on the $2,075 level for new entrants while aiming for the $2,100 level. It should be noted that a rising trendline connecting the 2011 and 2020 highs, which was around $2,110 at press time, may pose a challenge for gold buyers above $2,100. .