Gold Daily Update: Geopolitical Tensions and US Nonfarm in Focus

The gold price is consolidating ahead of the Nonfarm Payrolls report on Friday. XAU/USD is stuck between daily resistance and support, finishing 0.2 percent higher on Thursday near $1,940. The collapse of peace talks between Russia and Ukraine has increased demand for safe-haven currencies, including the US dollar, stifling bullish advances in gold.

The dollar is rising around 1.6 percent in March and around 2.8 percent in the first quarter, despite this week’s optimism that peace talks would cease in Ukraine five weeks after Russia’s invasion. Markets anticipate that they will resume on April 1, along with Nonfarm Payrolls.

Even though the White House’s announcement of a historical crude oil reserve release has caused a slowdown in global oil prices, contributing to a modest softening of inflation fears, geopolitical worries and further month-end declines in US yields are keeping gold supported. Spot prices (XAU/USD) found decent support in the $1920 zone during the European session and have since advanced into the $1940s, trading with 0.6 percent on-the-day gains. On Thursday, Russian President Vladimir Putin announced that he had signed an order requiring European nations to pay for Russian gas by opening rouble accounts at Russian banks beginning on April 1.

The announcement raises economic tensions between Russia and Europe and increases the risk of Russian gas flows to Europe being halted. If Russia were to cut off gas supplies to Europe, the Eurozone economy would suffer greatly (likely throwing it into immediate recession). The repercussions for ECB policymaking are not immediately clear, but the overall uncertainty has triggered a flight to safety. Global stock indices are falling, as are bond yields, as investors seek to mitigate risk as the quarter comes to a close, creating favorable trading conditions for gold.

Energy-related tensions among EU nations and Russia come amid dwindling optimism about recent advancement in the Russo-Ukraine peace talks. Talks will resume on Friday, but if the broader geopolitical picture continues to worsen, XAU/USD could test recent highs in the $1960s. But, of course, US economic data remains a focus, with the official March jobs report due on Friday.

Already this week, labor market data has been robust, indicating that it will be a strong release, which should further clarify expectations for a 50 basis point rate hike from the Fed at its next meeting. Given how much Fed hawkishness is already priced in, it’s debatable how much downside risk Friday’s US jobs report poses to gold.