- Gold price consolidates above $1,910 on Wednesday.
- Improving sentiment on expectations of a diplomatic solution to the war between Russia and Ukraine weighs on the USD.
- The focus will be on the Fed’s projections and Powell’s speech for the next push in the price of gold.
The price of gold (XAU/USD) moves sideways during the European session on Wednesday, consolidating its recent decline from the highs of $2,070 reached last week. At time of writing, gold is trading at $1,922, up 0.21% on the day.
After falling to fresh two-week lows at $1,906 the day before, the price of gold appears to be consolidating amid an improvement in risk sentiment in the market. The improvement of the feeling is weighing on the safe haven USD. At time of writing, the DXY Dollar Index is trading at 98.59, down -0.43% on the day. This pullback in the dollar is supporting gold prices, denominated in dollars.
The improvement of the feeling is produced by the hopes for a diplomatic solution to the war between Russia and Ukraine. Earlier in the day, the Sputnik news outlet reported that a Russian diplomat had said that “Moscow is ready for any format of dialogue on the crisis in Ukraine if the latter seeks diplomatic solutions”. In addition, Russian Foreign Minister Sergei Lavrov said on Wednesday that “peace talks with Ukraine are not easy, but there is some hope of compromise“.
To this optimistic news is added the news reported by the Chinese media Xinhua, that the country’s government has said that measures will be taken to boost the economy during the first quarter and that they will work to keep the stock markets stable.
On the other hand, high US Treasury yields could cap USD’s slide and weigh on the underperforming yellow metal.
Therefore, it seems that investors prefer to wait on the sidelines before opening new positions in gold and wait for the next catalyst.
With that being said, the Federal Reserve’s decision on interest rates will be released today. It is widely expected that The Fed makes its first rate hike of 25 basis points since the pandemic began. This move is already priced into the markets, so all attention will be focused on the updated growth and inflation projections and the subsequent speech by Fed Chairman Jerome Powell.
See: Federal Reserve Preview: Gold needs dovish Fed to regain traction
gold technical levels
Source: Fx Street
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