- XAU gold found good support at the $1,850 area and advanced on Wednesday in the run up to the Fed Minutes.
- Geopolitical angst over Russia/Ukraine remains elevated, underpinning gold, which is also supported by technicals.
As US and NATO officials continue to question the veracity of Russian claims that the country is now withdrawing troops from its border with Ukraine, markets remain nervous and cautious at the prospect of an eruption of military tensions. in the region. This is helping to keep gold spot prices (XAU/USD) above key support at the $1,850 level. At current levels in the $1,865 zone, XAU/USD is trading with daily gains of around 0.5%, undeterred by the latest US retail sales figures which were much better than expected for January, although they also saw strong negative revisions in the December numbers.
As gold traders keep an eye on geopolitical developments in Eastern Europe, the focus is increasingly shifting to Wednesday’s release of the Fed’s January monetary policy meeting minutes. Fed Chairman Jerome Powell refused to rule out the possibility of a further 25bp rate hike in March. In the wake of recent surprises in consumer and producer price inflation data, as well as hawkish comments from some Fed policymakers (such as James Bullard), US money markets. they have increasingly leaned towards a 50bp move next month. Therefore, the Minutes will be scrutinized for any indication of FOMC support for a rate hike greater than 50 bps.
The fact that XAU/USD found solid support at the $1,850 level on Wednesday is positive from a technical perspective. The precious metal recently broke north of a long-term pennant structure and finding support at $1,850, XAU/USD found support at the retest of the pennant. Therefore, technicians could now see a move back to multi-month highs in the $1,880 area as very likely and perhaps even a push towards mid-2021 highs in the $1,920 area. If the geopolitical situation in Eastern Europe were to escalate further, that would give a fundamental impetus to such a movement.
Source: Fx Street
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