Mixed bag from Russia-Ukraine war has made Fed’s policy actions more important to investors.
Fed’s modest hawkish stance on stagflation is a result of intensifying fears about stagflation.
UpdateGold (XAU/USD), extends Friday’s disappointing performance, as sellers target $1,970 in the first hours of Monday’s Asian session.
Recent losses in yellow metal could be due to increased hope for a Ukraine-Russia ceasefire and easing tensions between the US & China.
Reuters reported positive developments in the Moscow-Kyiv negotiations over the weekend. This was following positive updates from the Russian President Vladimir Putin’s Friday talks between Russia and Ukraine. The news by Bloomberg also indicated that diplomats from China and the United States will meet for their first time since Monday’s Ukraine-Russia crisis.
It is worth noting that the XAU/USD buyers are hopeful because of the chatter surrounding Russian prosecutors’ warnings for the West and Pentagon Press Secretary John Kirby’s remarks suggesting Russian forces “broaden their target sets”.
These plays saw the S&P 500 Futures increase 0.80% intraday, while the US 10-year Treasury yields increased four basis points (bps), to 2.046% at press time.
Gold traders will continue to monitor developments in Ukraine. Talks surrounding Fed’s monetary policy meeting are also important amid the possibility of a 0.50% increase in the rate.
End of the update.
The gold (XAU/USD), is expected to trade on Monday. A wider risk-off impulse could provide tailwinds for the downside, while upside gains will be limited by a likely hawkish position this week. Although the odds of an interest-rate hike by the Federal Reserve (Fed), are high, investors will remain cautious about the extent of any such hike.
Gold prices have been influenced by the Russia-Ukraine war headlines. U.S. Deputy Secretary Wendy Sherman stated that Russia showed signs of willingness for substantive negotiations to end the conflict on Sunday. On the risk-off side, Russian missiles attacked a large Ukrainian base close to the border with NATO member Poland, increasing fears of a third world war.
Russia-Ukraine war headlines won’t be a big deal for the precious metal. Instead, investors will concentrate on the likely monetary policy actions by the Fed this coming week. The central banks have had to deal with the difficult task of dealing with Russia’s invasion in Ukraine. According to the US Consumer Price Index (CPI), the Fed will make a 50-basis point (bps) interest rates decision on a print of 7.9%, without taking into account the effects of higher oil prices. The Fed is taking a moderately hawkish stance despite the escalating fears of stagflation.
Technical Analysis of Gold
XAU/USD auctions in a falling channel on an hourly basis, which signals for a weak move with a negative bias. Support has been found at $1,975.40 near the 200-period Exponential Moving average (EMA). Relative Strength Index (14) oscillates in a range between 40.00-60.00 which indicates a back-and-forth movement in precious metal ahead.
