Gold Flat As Russia-Ukraine Tensions Eases

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Gold prices barely moved on Wednesday as fears of a Russian invasion dissipated. It countered the effect of weaker bond yields. The bullion reached an eight-month peak in the last session on subdued yields. But today, it was pulled down slightly by the firmer dollar. The stronger dollar made the yellow metal more expensive for overseas investors.

Spot gold is currently trading at $1,885.50 per ounce as of 0715 GMT.

Yesterday, Moscow announced that its troops near the Ukrainian border have returned to base. However, after the announcement, Ukraine reported denial-of-service cyberattacks on its defense ministry and two banks. Some experts suggested it could be Russia. But the Russian Federal Security Service has yet to release a comment on the issue.

AirGuide director of corporate advisory Michael Langford said that investors prefer the dollar over gold. But further de-escalation in the Ukraine crisis could push it down and prompt a gold rally. Phillip Futures analyst Avatar Sandu added that most traders expect higher volatility in the gold markets.

Meanwhile, a Reuters’ poll revealed that the U.S. Federal Reserve could start its tightening cycle with a 25-basis-point interest rate hike in March. The economists forecast rates to rise each quarter to reach 1.25%-1.50% by December. Some of the respondents predicted a 50-basis-point hike. In any case, it would affect gold prices.

In the UK, inflation is projected to reach a 30-year peak of 7% in April. It is pushing expectations that the Bank of England (BoE) will raise interest rates this year. But there was a gap in inflation forecasts of economists and the BoE. Economists predicted inflation to go back down to 2.2% by the second quarter of 2023. The BoE disagreed and said it could remain around 3.5% during that quarter and drop to around 2% only in early 2024.

On the technical front, DailyFX strategist Margaret Yang noted the gold prices are forming a Double Top chart pattern. She suggested that the overall trend remains bullish given the flattening of the MACD indicator and the formation of consecutive higher highs and higher lows. She sees an immediate support level at $1,834.

FXStreet senior analyst Dhwani Mehta agreed and added that the Technical Confluences Detector shows that the downside in the gold price was capped in the $1,852-$1,850 zone.