Gold Rockets Over $1,900: Geopolitical Tensions in Play

Gold prices closed at $1912.05 after hitting a high of $1918.30 and a low of $1839.70. GOLD continued its bullish momentum and reached its highest since the end of May 2021 amid rising geopolitical tensions and the weakness of the US dollar. After Russia ordered troops into breakaway regions of eastern Ukraine, the precious metal reached a near nine-month high. The escalated Ukraine crisis added to the demand for the safe haven and pushed gold higher.

On Monday, Russian President Vladimir Putin recognized two breakaway regions in eastern Ukraine as independent and ordered the Russian Army to launch a peacekeeping operation in the area. Putin’s order accelerated the crisis, as the West has already shown concerns that this attack could unleash a major war.

In response to Putin’s step, the White House said that US President Joe Biden had signed an executive order to prohibit trade and investment between US individuals and the two breakaway regions of eastern Ukraine. These geopolitical developments weighed heavily on US benchmark 10-year yields and the DXY. Precious metal yields slipped to 1.86%, and the US Dollar Index dropped to 95.69 levels, pushing precious metals higher.

On Monday, the Federal Reserve Governor Michelle Bowman said that the incoming economic data would be assessed over the next three weeks to decide whether a half-point interest rate rise is needed at March’s next central bank’s meeting. These comments came in after policymakers debated how aggressively to begin their tightening cycle.

Fed officials agreed that inflation was tightening its grip on the economy, and employment was becoming strong, making it time to increase interest rates. However, the decision about the pace of rising interest rates has not been made yet. Therefore, the decision will depend on a meeting-by-meeting analysis of inflation and other data.

The precious metal was gaining strength on the back of increased geopolitical tensions between Russia and Ukraine and rising inflationary pressures. However, the bets about interest rate hikes by the Federal Reserve in the upcoming meeting added some pressure on gold and kept the gains in the yellow metal limited for the session.

Gold Technical Outlook

Technically, gold is skewed to the upside. The daily moving averages (DMAs) have a bullish slope and are located well below the XAU/USD spot price. This, combined with the breach of a nine-month-old downslope resistance trendline, fueled the uptrend, allowing gold bulls to reclaim the $1900 mark. XAU/USD first resistance would be $1,916. Breaching the latter will expose the January 2021 highs of $1,959, which, if cleared, could pave the way to $2,000. Good luck!