Gold Price Forecast: XAU/USD defends critical support line as Russia-Ukraine war flags growth risks

Gold price once again displayed good two-way price action on Monday, with persistent volatility on incoming headlines concerning the Russia-Ukraine war. Gold regained ground above the $1,900 mark in the first half of the day, as risk sentiment soured on the Western sanctions over the weekend that banned Russia from the SWIFT international payment system. In response to that Russian President Vladimir Putin ordered nuclear deterrence on high alert. Further, Washington Post (WaPo) reported, citing a US administration official, “Belarus is preparing to send soldiers into Ukraine in support of the Russian invasion. However, the tide turned in favor of gold bears after the market mood turned positive, as the peace talks between the Russian and Ukrainian delegations kicked in. Amid risk-recovery, gold price lost ground once again below $1,900 even as the Russia-Ukraine negotiations ended with no progress.

Gold price is looking to extend the previous downside on Tuesday, as the US dollar remains strongly bid amid a return of risk-off mood. Hostiles continue despite the negotiations, as Russia is seen escalating violation in Ukraine amid the West’s plans to freeze as well seize Putin’s assets. Traders also prefer to hold the US currency heading into the first significant American economic data – the ISM Manufacturing PMI due later this Tuesday ahead of Wednesday’s Fed Chair Jerome Powell’s testimony. Meanwhile, markets have started to grow more concerned about the damaging impact of the Russia-Ukraine war on the global economy, which is still reeling from the post-pandemic effects. Investors’ wariness could help keep a floor under gold price.

Gold Price Chart - Technical outlook

Gold: Daily chart

Gold’s daily chart shows that price has been forming higher lows, invariably defending the month-long rising trendline support, now pegged at $1,895.

If the bearish pressures intensify and sellers yield a daily closing below the latter, then a fresh downswing will come into force, opening floors towards Thursday’s low of $1,878.

The additional declines will call for a test of the ascending 21-Daily Moving Average (DMA) at $1,862.

With the 14-day Relative Strength Index (RSI), however, holding firmer above the midline, gold bulls could stage a rebound from the abovementioned critical support, putting the $1,920 supply zone back on the buyers’ radars.

Further up, buyers could flex their muscles towards the $1,950 psychological level.