- Headlines from Russia/Ukraine have been negative and indicative that de-escalation in the near future remains highly unlikely, supporting haven assets.
- US data and Fed speeches, while worth following, will likely play a supporting role this week.
The gold appears to have started March where it left off in the final weeks of February and is trading firmly up front, supported by a decent dose of demand for inflation protection as commodity prices rise. Gold prices (XAU/USD) are currently trading in the $1,920 zone, up 0.5% on the day, with tailwinds also coming from global debt markets, where yields have slumped for the second session in a row as traders cut bets central bank adjustment. The US 10-year Treasury yield, for example, dipped a further 9 bps on Tuesday to below 1.75%, having been above 2.0% as recently as last Friday. Lower bond yields increase the relative attractiveness of investing in non-yielding assets such as precious metals.
In terms of the latest on the Russia/Ukraine front; the headlines have been negative and indicative that de-escalation in the near future remains highly unlikely. Ukrainian President Volodymyr Velensky said talks between the Ukrainian and Russian delegation on Monday did not achieve the intended goal and that Russia continues to build up troops in the north in preparation for an assault on Kiev. Meanwhile, Russian forces continue to gain ground in the southern regions of the country and the rhetoric between Russian and Western/NATO officials is becoming increasingly heated.
As a result, energy prices and prices of other commodities of which Russia is a sterling exporter are likely to remain sustained for the foreseeable future, which may keep precious metals bid amid demand for protection. against inflation/stagflation. Afterwards, the bulls are likely to continue to watch for a retest of last week’s highs in the $1,970s and a possible pullback to all-time highs above $2,000. Traders should remember that geopolitics is not the only game in town this week, with plenty of US and Fed data to watch as well, although this is likely to play a supporting role in Russia/Ukraine developments.
Additional technical levels
Source: Fx Street
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