Gold Rockets to $2,050 – Boosted Safe-haven Demand in Play

Gold buyers take a pause around $2,042, down 0.40 percent intraday during the Asian session on Wednesday. As a result, the yellow metal struggles to continue the recent four-day rise while remaining near the greatest levels observed in August 2020.

Ukraine’s and Venezuela’s efforts to defuse geopolitical tensions with Russia and the United States have recently boosted the market mood. As a result, the metal’s safe-haven demand suffers, prompting the recent drop in XAU/USD prices.

The previous day, headlines from AFP, “In a bow to Russia, Ukraine is allegedly no longer demanding on NATO membership,” became the key risk-on stimulus. This news, along with the confirmation of Ukraine’s first humanitarian corridor, is helping to calm the market’s fears. Venezuela’s release of an American prisoner and the US’s subsequent indication of relaxing sanctions also benefit the risk appetite while undermining gold’s safe-haven appeal.

On the contrary, Russia may not applaud Kyiv’s decision to abandon NATO membership as Moscow may dread the country joining the European Union (EU), which would demolish President Vladimir Putin’s unspoken objective of installing a Kremlin-controlled leader in Ukraine. Recently, Russia called for the nationalization of foreign-owned enterprises that had shut down, casting doubt on the market’s confidence.

In terms of data, the US trade imbalance reached a new high, while small company confidence fell to its lowest level in 13 months, according to the IBD/TIPP Economic Optimism gauge for March. Furthermore, China’s Consumer Price Index (CPI) surpassed the 0.8 percent prediction to reprint 0.9 percent prior statistics, while the Producer Price Index (PPI) exceeded the 8.7 percent market consensus with 8.8 percent YoY figures, compared to 9.1 percent previously readouts.

The US 10-year Treasury yields fell two basis points (bps) to 1.85 percent, while the S&P 500 Futures rose 0.40 percent on the day at the latest.

To summarize, recent mixed geopolitical concerns may pose a challenge to gold buyers, but concerns about stagflation, as a result of the recent increase in commodity prices and economic issues as a result, may keep XAU/USD buyers optimistic.

Gold – XAU/USD – Technical Outlook

The previous day, gold prices crossed the upper line of a six-week-old rising channel, and numerous resistances indicated throughout late 2020. Overbought RSI, on the other hand, appears to have sparked the quote’s fall from its record high of $2,075, printed in August 2020.

Given the new challenges to gold’s safe-haven demand, as well as the MACD line’s expected to drop from higher levels, gold sellers may target the prior important resistance point around $2,020. However, if the quotation falls below $2,020, it will be vulnerable to shattering the $2,000 barrier while striving for fortnight-long horizontal support near $1,975.

Meanwhile, buyers will keep an eye on the $2,075 level for new entrants while aiming for the $2,100 level. It should be noted that a rising trend line connecting highs in 2011 and 2020, which was around $2,110 at the time of publication, may pose a challenge to gold buyers over $2,100.