- Gold attracts some safe-haven currency flows on the risk of a further escalation of the conflict between Russia and Ukraine.
- The drop in US bond yields also benefits the unprofitable yellow metal, although the upside remains limited.
- Aggressive Fed rate hike expectations underpin the dollar and act as a headwind ahead of the FOMC decision.
The price of gold (XAU/USD) it moves higher during the first hours of the European session and rises to a new daily high, around the $1,676 area, reversing much of the losses of the previous day. The upturn is due to revival of demand for safe haven assetsalthough strong US dollar buying continues to limit XAU/USD gains.
Against the background of concern about a further global economic recession, the risk of a new escalation of the conflict between Russia and Ukraine drives some safe-haven flows into gold. The Russian President, Vladimir Putin announced a partial military mobilization and tempered investors’ appetite for riskier assets.
Risk aversion is reflected in an intraday pullback in US Treasury yields, seen as another factor benefiting underperforming gold. That said, expectations that the Fed will maintain its aggressive tightening policy and raise rates at a faster pace should act as a tailwind for US bond yields.
In fact, markets seem convinced that the US central bank will make another 75 basis point rate hike at the end of a two-day monetary policy meeting on Wednesday. This continues to support underlying dollar bullish sentiment, which could also help cap golddenominated in dollars.
On the other hand, investors also appear reluctant to open aggressive positions and may prefer to stay on the sidelines on key central bank risk. Market participants will be looking for new clues about the future rate hike path. Therefore, the focus will be on the updated economic projections and the so-called dot plot.
Additionally, Fed Chairman Jerome Powell’s remarks at the post-meeting press conference will be instrumental in influencing short-term dollar price dynamics. This, in turn, should help determine the next directional move for gold.
gold technical levels
Source: Fx Street
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