Gold Outlook: Prices Cool Amid Prospects of US-Russia Meeting on Ukraine Next Week
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Gold, XAU/USD, Russia, Ukraine, Technical Analysis - Talking Points:
- Gold prices closed at highest since June 2021 amid Ukraine tensions
- Next week’s US-Russia meeting cooling XAU/USD’s ascent in Asia
- Data is lacking into weekend, rising gold short bets offer upside bias
Gold prices roared higher over the past 24 hours as geopolitical tensions around Ukraine unnerved traders. During Thursday’s Asia-Pacific trading session, unconfirmed reports crossed the wires that claimed Ukraine fired mortars and grenades on LPR locations. This induced risk aversion and increased the appeal of holding the anti-fiat yellow metal.
During the Wall Street trading session, the United States brought forward warnings of a potential Russian attack on Ukraine. Top officials from Russia countered that no such invasion was underway nor planned. These diverging responses meant heightened uncertainty around the unfolding situation. Such conditions tend to bode ill for market sentiment. As gold rallied, the S&P 500 sank over 2 percent on Thursday.
XAU/USD is on a cautious retreat during Friday’s APAC session. This followed reports that the US accepted discussions with Russia’s Foreign Minister Sergei Lavrov in Europe next week. If tensions do not escalate in the interim, gold could find it difficult to find further upside momentum. Simultaneously, until progress is made, downside potential can also be constrained. A lack of major economic event risk into the weekend may thus leave XAU/USD in a consolidative state.
Gold Technical Analysis
Gold closed at the highest since June 2021 on Thursday as prices stopped short of the key 1898 – 1916 resistance zone. Thus far, the yellow metal is heading for its best month in almost one year. Immediate support seems to be the former 1867 – 1879 resistance zone, with the 20-day Simple Moving Average approaching from below that. Clearing resistance exposes November 2020 highs (1949 – 1965).
XAU/USD Daily Chart
Chart Created Using TradingView
Gold Sentiment Analysis - Bullish
According to IG Client Sentiment (IGCS), about 62% of retail traders are net-long gold. Since IGCS tends to function as a contrarian indicator, and that most traders are biased to the upside, this suggests prices are still vulnerable. However, downside exposure increased by 21.32% and 43.32% compared to yesterday and last week respectively. With that in mind, recent shifts in positioning hint that gold may rise ahead.
*IGCS chart used from February 17th report
--- Written by Daniel Dubrovsky, Strategist for DailyFX.com
To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.