- Gold lost ground for the third day in a row and fell near more than a week’s low on Tuesday.
- Hopes for Ukraine diplomacy weigh on the safe-haven precious metal amid rising US bond yields.
- Expectations for the Fed to start tightening should now act as a headwind for gold.
The price of gold (XAU/USD) has extended its recent sharp pullback from near the all-time high, around the $2,070 area touched last week, and has seen strong sales for the third day in a row on Tuesday. This also marks the fourth day of negative movement in the previous five and drags spot prices to a 1.5-week low, around the $1,925 region. the hopes of progress in talks on ceasefire between Russia and Ukraine and a diplomatic solution to end the war they weighed in on the precious metal of safe haven. In fact, the Russian and Ukrainian delegations held the fourth round of negotiations on Monday, and the discussions are scheduled to resume on Tuesday.
In addition to this, the recent strong move in US Treasury bond yields was seen as another factor driving money flows away from the non-yielding XAU/USD. The markets seem convinced that the Fed will confirm an imminent start of monetary policy tightening and raise its funds rate to combat stubbornly high inflation. This, in turn, pushed the benchmark 10-year US government bond yield to its highest level since June 2019. Therefore, the market will focus on the outcome of the two-day FOMC monetary policy meeting. scheduled for Wednesday. This will influence the USD in the short term and provide a further boost to the price of gold, denominated in dollars.
Meanwhile, investors will take cues from incoming geopolitical news amid the risk of a further escalation in the Russia-Ukraine conflict. Indeed, Russia on Sunday attacked a large Ukrainian base near the border with NATO member Poland. In addition to this, a Kremlin spokesman said on Monday that all Russian plans in Ukraine will be fulfilled in full and within the described timeframes.
gold technical perspective
From a technical perspective, XAU/USD has fallen to the 50% Fibonacci retracement of the strong move from $1,780-$2,070 to a multi-year high. Some continuation selling will suggest that markets have already started to look past the initial shock over the Russian invasion of Ukraine and would set the stage for further losses. Gold could then accelerate the decline towards testing levels below $1,900, a support marked by the 61.8% Fibonacci. This is followed by support near the region of $1,875which if broken decisively will change the short-term bias in favor of the bears.
On the other hand, the region of $1,948-$1,950 now seems to act as an immediate resistance ahead of the 38.2% Fibonacci, around the area of $1,960. Sustained strength above this level has the potential to push gold towards the key psychological level of $2,000. The latter coincides with the 23.6% Fibonacci, above which the precious metal looks ready to resume its upward move and jump towards the next relevant hurdle near the breakout region. $2,048-$2,050.
gold daily chart
gold key levels
Source: Fx Street
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