XAU/USD trades under pressure as investors seek safety

• The gold price is under pressure, despite a sour market mood amid ongoing tensions in Eastern Europe.
• The US Federal Reserve’s decision had a limited lasting impact on financial markets.
• XAU/USD is trading at the lower end of the daily range, short-term neutral.

The XAU gold has seen little progress since bottoming out on the day at $1,926.39, currently unable to advance beyond $1,940. Gold price remains low, now trading around $1,930, despite a gloomy market mood putting investors on the safe side. In fact, the US dollar has risen steadily across the board, even against safe rivals like the CHF and JPY. The USD/JPY pair is trading at fresh multi-year highs at the 119.30 price zone.

Risk sentiment has taken a hit since US Secretary of State Antony Blinken said Russia could be contemplating a chemical weapons attack at the last US session. In addition, the lack of substantive progress in the peace talks between Russia and Ukraine has left the markets in limbo, causing new flows of risk aversion towards the US dollar at the expense of gold. Investors are also remaining cautious ahead of a meeting between US President Joe Biden and Chinese President Xi Jinping later this Friday. The two leaders are likely to discuss the Russian invasion of Ukraine, among other diplomatic and trade issues.

Earlier in the week, the US Federal Reserve surprised market participants with an aggressive stance. The central bank raised its main rate by 25 basis points and the dot chart included six more likely hikes for the year. What’s more, Chairman Jerome Powell said plans to reduce the $9 trillion balance sheet would likely be complete by his next meeting in May.

Meanwhile, European indices are trading in the red, weighing on their US counterparts. US indices are starting the last day of the week trading with a soft tone, although not far from Friday’s closing levels.

Gold Technical Analysis

From a technical perspective, the shiny metal is down for the week, albeit below its low of 1.8954 a troy ounce. XAU/USD bounced back sharply after approaching the 61.8% retracement of this year’s rally at around $1,890 and is currently trading between the 38.2% and 50% retracement of the same rally.

On a daily basis, the shiny metal has encountered sellers around a flat 20 SMA, while technical indicators have lost their earlier momentum, suggesting a decline in buying interest.

The short-term picture is a bit more encouraging for the bulls as the price of gold is finding buyers around a slightly bullish 20 SMA while technicals turned slightly higher within positive levels. Still, XAU/USD will retain limited upside as long as it remains below the strong static resistance area around the $1,960 level.

Technical levels