The threat of a Russian invasion of Ukraine looms as
aggressive Fed rate rise bets are repriced.
After the bull cross, the daily technical setup favours gold
buyers.
Gold buyers have stayed away so far on Wednesday, staying
around the $1,900 level, as the deadlock over the Ukraine situation causes
investors to reassess their positions. The geopolitical tensions between the
West and Russia increased when Russian President Vladimir Putin recognised the
so-called Donetsk and Luhansk People's Republics and instructed the Russian
Defense Ministry to deploy soldiers in those territories to carry out
"peacekeeping tasks." The United States, the United Kingdom, and
Europe announced sanctions as retaliation for Russia's atrocities against its
neighbour.
Despite the West's warnings that further penalties are on
the way if Russia launches a full-scale invasion of Ukraine, markets assessed
the measures as rather mild. As a result, risk-off mood eased in the American
trading day, putting downward pressure on safe-haven gold.
Energy prices soared when Germany blocked the Nord Stream 2
project in retaliation to Russia's actions, even as Europe's economic
superpower confronts its biggest energy shortage since the 1970s, putting
downward pressure on gold prices.
Looking ahead, geopolitics will continue to drive mood, with
Ukraine in the midst of a storm, and current market quiet perhaps heralding the
start of a Russian invasion. The cancellation of diplomatic discussions between
US Secretary of State Antony Blinken and Russian Foreign Minister Sergey Lavrov
is also seen as a sign of rising tensions by the markets. With the next crucial
event at Thursday's G7 summit being eyed within a relatively data-thin environment,
a resurgent flight to safety would renew bullish interest in gold price.
The similar levels will play out in the short term for gold,
with bulls hoping for acceptance above the June 2021 highs of $1,917 after the
eight-month highs of $1,914 are regained.
The bull crossing between the 100 and 200-day moving
averages keeps buyers in the game, while the 14-day Relative Strength Index's
(RSI) decline from overbought zone provides a new light of optimism for the
next move upward.
A test of the $1,920 round level will be unavoidable if the
above-mentioned resistance levels are broken on a buying rebound.
The immediate support, on the other hand, is indicated at
$1,890, below which the February 18 lows of $1,887 will be challenged.
The next substantial downside target is at $1,870, which is
where the rising trendline support appears.
Below the latter, selling pressure will likely increase,
opening floors towards the psychological $1,850 mark.