XAU in positive territoriy ahead of US session with US and Russia talking over Ukraine
- Gold saw some substantial buying on Wednesday when prices were dipping lower.
- Headwinds are present though, with as a possible peace deal for Ukraine as main tail risk.
- Gold is back on track to test the all-time high at $2,942.
Gold’s price (XAU/USD) is picking up where it left off on Tuesday, with prices back up to $2,920 at the time of writing on Thursday, while Bullion traders shrugging off the United States (US) Consumer Price Index (CPI) data for January released on Wednesday. Traders are also ignoring the possibility of a peace deal formation with United States (US) President Donald Trump and Russian President Vladimir Putin, who have spoken on the phone to outline a meeting soon to work out the broad strokes of a peace deal. Despite these quite substantial tail risks, Gold is rallying again, revealing a firm commitment from traders to keep residing in the safe haven asset.
Meanwhile, traders are digesting Federal Reserve (Fed) Chairman Jerome Powell’s two testimonies at Capitol Hill before lawmakers. The release of January’s Consumer Price Index (CPI) numbers on Wednesday proved that the Fed has the right angle to keep rates steady for longer. US yields surged during the past two days, though with the pickup in Gold buying, the question will be whether US yields can keep rising in tandem with an uptick in Gold, which is a bit contradictory.
Daily digest market movers: EU pushing back
- US President Donald Trump said that Hamas must release all hostages by noon on Saturday or ‘all hell will break loose’, Reuters reports.
- Ukraine talks are spurring risk assets and the Euro (EUR) against the US Dollar (USD). This, in turn, triggers a softer US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, which is beneficial for Gold.
- This Thursday a general NATO meeting is being held. Several European countries are condemning the approach from President Donald Trump. By committing to Ukraine not taking part into NATO and Ukraine being forced to give up current occupied areas, negotiations are already starting on the backfoot with Ukraine being involved as such, Bloomberg reports.
- After the hotter-than-expected January CPI reading, the CME FedWatch tool shows a 64.3% chance that interest rates will remain unchanged at current levels in June, compared to 50.3% before the release. This suggests that the Fed would keep rates unchanged for longer to fight against persistent inflation.
Technical Analysis: Falling knives from here
Gold traders have used January’s CPI release as an entry point to buy more stakes in their beloved precious metal. However, a considerable tail risk could deliver quite a harsh and quick correction in Gold: the Ukraine peace talks. Once those peace talks start to take shape and might get support from Ukraine and Europe, a risk-on wave in markets would occur, with safe-haven outflows and Gold being punished.
The first support level on Thursday is $2,892, which is the Daily Pivot. From there, S1 support should come in at $2,875. The S2 support at $2,847 should act as a safeguard and avoid any further declines to the bigger $2,790 level (October 31, 2024, high).
On the upside, the R1 resistance at $2,920 is the first level that needs to be recovered, followed by the R2 resistance at $2,937. In case the rally continues, the $2,950 big figure will be tested for a break to the upside. Further up, the $3,000 psychological level could be next.
