Gold Price Forecast: Acceptance above 21-DMA is critical for XAU/USD for additional recovery gains

• Gold stages a decent comeback after finding strong bids under $1,900.
• Hawkish Fed lifts mood, downs DXY, concerns over Russia-Ukraine talks loom
• Daily technical setup turns in favor of bulls but recapturing 21-DMA is critical.

Gold price witnessed good two-way businesses on Wednesday, courtesy of the incoming updates on the Russia-Ukraine peace talks and the hawkish Fed decision. The yo-yo in risk sentiment aided the volatility around the yellow metal amid diplomacy on the Russia-Ukraine. The Financial Times (FT) reported, citing sources, Ukraine and Russia have made significant progress towards a potential 15-point peace plan if Kyiv declares neutrality and accepts limits on its military forces. The Independent, however, quickly reported that Ukraine rejected Russian claims that it was open to adopting a model of neutrality comparable to Sweden in peace talks.

Meanwhile, gold price resumed its downtrend and hit fresh two-week lows of $1,895 in an initial reaction the 25-bps Fed rate hike announcement and the dot plot showing six more hikes this year. In his press conference, Fed Chair Jerome Powell showcased confidence in the economy by pointing to more rate hikes and plans for balance sheet reduction, which lifted the Wall Street sentiment. The improved market mood weighed negatively on the US dollar while the Treasury yields extended their corrective pullback, helping gold rebound towards $1,930.

Gold price is building onto the previous rebound on Thursday, benefiting from the persistent weakness in the US dollar alongside the yields. The risk-on trading in the global stocks continues to dent the dollar’s safe-haven appeal, although investors remain cautious amid fresh concerns over the Russia-Ukraine peace talks. Ukrainian President Volodymyr Zelenskyy said early Thursday, “negotiations between Russia and Ukraine are challenging,” adding that “talks between Russia and Ukraine are still ongoing.” Adding to it, the French Foreign Minister also raised skepticism on the negotiations.

Meanwhile, mounting tensions over global economic growth keep gold price supported, central banks opt for aggressive tightening to curb raging inflation. Next of relevance remains the Bank of England (BOE) interest rate decision for fresh trading opportunities in gold price while mid-tier US economic data will be eyed as well. The geopolitical developments concerning the Ukraine crisis will remain the main market driver.

Gold Price Chart - Technical outlook

Gold: Daily chart

As observed on the daily chart, the tide seems to have turned in favor of bulls, as the 14-day Relative Strength Index (RSI) has recaptured the midline, currently sitting at 52.47.

The road to recovery, however, needs acceptance above the upward-sloping 21-Daily Moving Average (DMA) at $1,940 on a closing baiss.

Recapturing the latter will trigger a fresh upswing towards Monday’s high of $1,955, above which bulls will target the February 24 highs of $1,975.

On the flip side, if bears take out the daily lows of $1,923, then the correction from 19-month highs could resume, opening floors for a retest of $1,895. That level is the confluence of the previous day’s low and the rising trendline support.  

The additional declines will call for a test of the ascending 50-DMA at $1,873. Ahead of that, the February 24 lows of $1,878 will challenge the bullish commitments.