Gold’s Bullish Bias Dominates above $1,880: Geopolitical Tensions in Play
Skerdian Meta • 2 min read
Gold price is retreating from fresh eight-month highs of $1,903 reached in the early Asian session, as improved market sentiment reduces the metal’s safe-haven appeal. Investors are hoping that US President Joe Biden’s meeting with international leaders on a possible Russian invasion of Ukraine will pressure both warring parties to de-escalate the ongoing geopolitical tensions.
On Thursday, the risk was heavily priced into the US’s warnings about an impending Russian incursion on the Ukrainian border, while the latter continued to deny such plans. Reports of mortar shelling fired by Ukraine’s military and rebels in four war-torn areas of eastern Ukraine’s Donbas region triggered a risk-off wave that shook markets.
Looking ahead, geopolitical developments in Ukraine will continue to be the primary market driver this Friday, despite a lack of first-tier US macro data.
GOLD prices rose on Thursday, with the metal closing near the day’s highs of $1,901 at $1,898, up more than 1.54%. Despite the risks of significantly higher real rates in the face of a hawkish central bank regime, the uncertainty surrounding Russia’s NATO crisis over Ukraine appears to be generating solid demand for gold as a safe haven.
However, the US dollar index was little changed on Thursday as investors considered comments made by NATO allies and officials that sent the market the message about the likelihood of war, following imminent shelling on the Ukrainian front line. The US dollar traded between 95.71 and 96.10 against a basket of rival currencies (DXY); however, Wall Street stocks were battered, with the S&P 500 down 2.1% to 4,380.26, the Nasdaq Composite down 2.9 percent to 13,716.72, and the Dow Jones Industrial Average down 1.8% to 34,312.03, its lowest level since 2022.
Investors continue to expect a 50 basis point hike at the Federal Reserve’s March meeting. However, money markets were pricing in a 72 percent chance of a 50 basis point rate hike next month, down from an 80 percent chance at the start of the week, likely weighing on the greenback. The 10-year US Treasury note yield fell eight basis points to 1.96 percent.
Gold Technical Outlook
Gold prices fell earlier this week due to RSI divergence and a failure to offer a decisive close above the November 2021 high. However, the metal’s inability to break through the January month high of $1,853 during the declines, combined with firmer MACD signals, has redirected gold buyers towards the $1,880 key barrier.
On the daily chart, the price is attempting to break through the longer-term resistance. If the price does not break through the May 2021 highs, the focus will shift back to the $1,880s and lower, keeping the 61.8% golden ratio in mind.
If the quote breaks through the $1,880 resistance, the $1,900 level and late 2021 peak of $1,917 will reappear on the chart. Alternatively, even if gold sellers manage to violate January’s peak around $1,853, an upward trend line from February 3, near $1,840, will act as an extra filter to the south. Good luck!