Gold Price Forecast: XAU/USD Surges to $1,960 Amid Geopolitical Tensions

Gold (XAU/USD) is in the lead for the third day in a row, with bids near $1,963 at the close of Friday’s Asian session. The yellow metal hit a new high in nearly two weeks the previous day, as tensions between Ukraine and Russia escalated. The metal’s recent strength, on the other hand, could be attributed to a drop in the value of the US dollar. Nonetheless, the US Dollar Index (DXY) fell 0.30 percent intraday to 98.50, snapping a two-day uptrend by press time. The recent weakness of the US dollar could be attributed to sluggish Asian yields, market inflation fears, and indecision regarding Ukraine’s conflict with Russia.

It’s worth noting that most global policymakers, not just the Fed, have recently emphasized inflation fears, which supports gold’s safe-haven demand. The most recent central bankers were from Japan. The US Federal Reserve (Fed) has hinted at a 0.50 percent rate hike, and there has been talking about Quantitative Tightening (QT).

Reuters quoted a senior US official as saying, “Russia will emerge from the Ukraine conflict weaker militarily and politically.” In the same vein, Reuters reported on a lack of precision in Russia’s precision missiles and a possible shortage in recent days. Australia and Japan have also joined the West in sanctioning Russia, heightening concerns about the Moscow-Kyiv crisis.

On Thursday, US Vice President Joe Biden urged European leaders, the Group of Seven (G7), and members of the North Atlantic Treaty Organization (NATO) to impose additional sanctions on Russia for its invasion of Ukraine. While his NATO allies could arrange battle guards for four Ukrainian cities and criticized Beijing’s ties with Moscow, the rest largely refrained from taking major punitive measures against Russia.

Despite the escalating inflationary fears and geopolitical woes resulting from the Russia-Ukraine crisis, the latest measures do suggest a ray of hope for a positive turn in the peace talks between Moscow and Kyiv, requiring GOLD traders to remain cautious. Aside from geopolitical headlines and Fedspeak, Covid updates and the US Pending Home Sales for February will also keep gold traders entertained.

Gold (XAU/USD) Technical Analysis

Gold prices remain comfortably above the 10- and 21-day moving averages, justifying the hidden bullish RSI divergence on the daily chart. When prices make higher lows but the RSI prints lower lows, the oscillator pattern is formed, which keeps XAU/USD buyers hopeful.

Nonetheless, the current upside target is the 23.6 percent Fibonacci retracement (Fibo.) of December 2021 to March 2022 upside, which is around $1,995. However, the previous support line from early February, which was close to $2,000 at the time of publication, will pose a challenge to gold buyers after that.

Pullback moves, on the other hand, may initially aim for a convergence of the 21-DMA and the 38.2 percent Fibo. level around $1,950. Following that, the 10-DMA and 50 percent Fibonacci retracement level, which is close to $1,938 and $1,912, respectively, will present a challenge to gold sellers. It’s worth noting that the XAU/USD bearish move is still elusive above the 50-day moving average of $1,888. Good luck!