Venezuela and Ukraine attempt to de-escalate market tensions, but Russia fears remain.
China CPI/PPI was firmer in February, but concerns about stagflation could help gold buyers.
Silver tries to hold more than $2000 – A hard landing ahead?
Buyers of gold take a break around $2,042, which is 0.40% lower intraday during Wednesday’s Asian session. The yellow metal fails to extend its previous four-day uptrend, but it remains at the highest levels since August 2020.
Market sentiment has improved recently due to the efforts of Venezuela and Ukraine to manage their respective geopolitical tensions against Russia and the US. The result is that the metal’s safe haven demand has been impacted, which has in turn led to the recent pullback in XAU/USD price.
AFP headlines: “In a nod towards Russia, Ukraine apparently no longer insists on NATO membership,” was the main risk-on catalyst for the previous day. The confirmation of the first humanitarian corridor to Ukraine in order to calm the market’s pessimism is also part of the news. The freeing of the American prisoner in Venezuela and hinting at easing sanctions by the US afterward are both favoring the risk appetite and negatively impacting gold’s safe haven appeal.
Russia may not be cheering Kyiv’s decision to abandon NATO membership. Moscow may fear that the enemy will join the European Union (EU). This would demolish President Vladimir Putin’s unstated goal of putting a Kremlin-controlled leader into Ukraine. Russia recently called for the nationalization of foreign-owned factories that have shut down operations. This raised doubts about the market’s optimism.
Data: The US trade deficit rose to a new record high, while small business confidence fell to its lowest level in 13 months, according to IBD/TIPP Economic Outlook gauge March. China’s Consumer Price Index rose above 0.8% to reprint 0.9% of the prior figures. Meanwhile, the Producer Price Index (PPI), crossed 8.7% market consensus with 8.8% YoY figures compared to 9.1% in previous readouts.
The mood is reflected in the US 10-year Treasury yields dropping two basis points to 1.85%, while the S&P 500 Futures rises 0.40% per day.
The recent geopolitical mix may pose a challenge to gold buyers, but concerns over stagflation due to the recent rally in commodity prices, and economic fears that result from it, could keep XAU/USD buyers optimistic.
Analyse technique
Gold prices passed the upper line in a rising channel that has been six weeks old and multiple resistances during late 2020. The quote pulled back from the record $2,075 high it reached in August 2020, however, due to overbought RSI.
Due to the recent challenges to gold’s safe-haven demand and the MACD line’s expected pullback from higher levels of demand, gold sellers may attempt to attack the previous key resistance zone around $2,020.
However, if the price falls below $2,020, it will be vulnerable to breaking the $2,000 threshold. Instead, we aim for fortnight-long horizontal support at $1,975.
Buyers will continue to keep an eye on the $2,000.75 for new entry, while aiming at the $2,000.00.
Note that an ascending trendline connecting highs in 2011 and 2020 will be challenging gold buyers above $2,000.
