Gold Price Forecast: XAU/USD awaits a fresh trigger to resume Ukraine crisis-led rally

Gold buyers are on the sidelines so far this Wednesday, hovering around the $1,900 threshold as the standoff on the Ukraine crisis leads to a rethink in the investors’ positioning. After Russian President Vladimir Putin recognized the so-called Donetsk and Luhansk People’s Republics and directed the Russian Defense Ministry to deploy troops in those regions to carry out “peacekeeping functions,” the geopolitical tensions between the West and Russia intensified. The US, the UK and Europe announced sanctions, as they punished Russia over its atrocities on its neighbor. Although markets viewed the sanctions as pretty tame, despite the West’s warnings that they are ready with more sanctions if Russia carries out a full-scale invasion of Ukraine. Therefore, the risk-off sentiment cooled off in the American trading session, weighing negatively on the safe-haven gold.

Gold price also faced headwinds from the revival of aggressive Fed’s tightening bets amidst soaring inflation, as energy prices rocketed after Germany halted Nord Stream 2 pipeline, in response to Russia’s move, even as Europe’s economic powerhouse faces its worst energy crunch since the 1970s.

Looking ahead, geopolitics will continue to lead the sentiment, with Ukraine in the eye of a storm and this calm in the market could be just before a potential Russian invasion storm. Markets also consider the cancellation of the diplomatic talks between US Secretary of State Antony Blinken and Russia’s Foreign Minister Sergey Lavrov, as a sign of escalating tensions. Resurgent flight to safety will revive the bullish interest in gold price, with the next critical event in Thursday’s G7 meeting eyed amid a relatively data-thin US calendar on Wednesday.

Gold Price Chart - Technical outlook

Gold: Daily chart

From a short-term technical perspective, the same levels will play out for gold price, with bulls looking for acceptance above the June 2021 highs of $1,917 once the eight-month highs of $1,914 is recaptured.

The 100 and 200-DMAs bull crossover keeps buyers in the game while the 14-day Relative Strength Index’s (RSI) pullback from the overbought territory offers a fresh ray of hope for the next leg higher.

If the abovementioned resistance levels are cleared on a buying resurgence, then a test of the $1,920 round level will be inevitable.    

On the flip side, the immediate support is seen at $1,890 the figure, below which the February 18 lows of $1,887 will be tested.

The next significant downside target is pegged near the $1,870 region, where the rising trendline support emerges.

Selling pressure will likely intensify below the latter, opening floors towards the $1,850 psychological barrier.