XAU/USD climbs back above $1,930 amid cautious market sentiment

• Gold regains strength on Wednesday amid lack of progress in peace talks between Russia and Ukraine.
• The Fed’s dovish outlook and elevated US bond yields could act as a headwind for the precious metal.
• The appearance of some purchases around the USD could help limit the rise in gold prices.

The gold has attracted some buying during the early part of the European session on Wednesday and has steadily climbed back above the $1,930 level, reaching a new daily maximum in the last hour. The market sentiment remains fragile amid lack of progress in peace talks between Russia and Ukraine. In fact, the Prime Minister of Italy, Mario Draghi, pointed out that Russia is showing no interest in a truce for successful peace talks. On the other hand, Russian Foreign Minister Sergei Lavrov said that talks with Ukraine are difficult, as kyiv is constantly changing its position. This, in turn, weighed on investors’ appetite for perceived riskier assets, which was evident by the modest pullback in equity markets and benefited the safe-haven precious metal.

The rally helped gold recover some of the previous day’s decline to the multi-day low, although the aggressive outlook of the Fed could limit any significant hike. It is worth remembering that the Fed indicated last week that it could raise rates in the remaining six meetings in 2022. Also, the Fed Chairman, Jerome Powell suggested on Tuesday that the US central bank could adopt a more aggressive response. to combat high inflation. Separately, San Francisco Fed President Mary Daly signaled it was time to undo monetary policy easing, while St. Louis Fed President James Bullard and Cleveland’s Loretta Mester they asked for faster uploads. Markets were quick to price in a 50 basis point rate hike at the next FOMC meeting.

Prospects for faster Fed tightening pushed the benchmark 10-year US government bond yield to its highest level since 2019. This, in turn, helped the US dollar attract some buying and should act as a headwind for gold prices, denominated in dollars. Therefore, the focus will remain on Fed Chairman Jerome Powell’s remarks at the BIS innovation summit later on Wednesday, which could provide some lift to gold. This coupled with further developments around the Russia-Ukraine war could lead to some significant trading opportunities around XAU/USD.

gold technical perspective

From a technical perspective, the two-way price movements seen in the past week point to the indecision among investors. This comes after the recent sharp pullback from near the all-time high and could be classified as a bearish consolidation phase. That said, it will be wise to wait for some continuation selling before positioning for any further bearish moves. Meanwhile, the area of $1,912-$1,910 seems to defend the immediate fall before the monthly minimum, around the region of $1,895. Sustained weakness below that level will reaffirm the negative bias and drag gold prices towards the next relevant support near the trading area. $1,870-$1,868.

On the other hand, immediate resistance is found near the $1,936-$1,938ahead of the region of $1,945-$1,950. This latest level coincides with the upper limit of the aforementioned trading range, which if broken decisively should pave the way for additional gains. Momentum could then push gold towards the middle hurdle of $1,975-$1,976above which the bulls could once again aim to recapture the key psychological level of $2,000.

Gold 1 hour chart

gold technical levels