- Gold has been on the front foot in recent hours, pushing towards $1910 and eyeing weekly highs just above it.
- Following US warnings to Ukraine that a Russian invasion could come within 48 hours, market anxiety is elevated.
- The precious metal is thus finding demand amid a decent safe-haven bid.
Spot gold (XAU/USD) prices have been on the front foot in recent trade hours, rallying from earlier session lows in the $1890 area to current levels at highs of the day just below $1910 as geopolitical angst rises. At current levels, the precious metal trades with on-the-day gains of about 0.5% and is now eyeing a test of weekly highs $1914 area. Given recent reports that the US has warned Ukraine that a Russian invasion could come within 48 hours against the backdrop of recent positive technical momentum, a continued push higher seems odds on.
The immediate area of resistance to note beyond this week’s highs is the early June 2021 highs at $1916.60. A break above this level of resistance could open the door to a push on towards a double top from 2020/early 2021 in the $1960 area. Such moves would likely be contingent on further escalation on the geopolitical front, and if US intelligence is right about Russia’s plans to invade within 24 hours, that would fit the bill.
In this scenario, market participants would rush into safe-havens like gold amid uncertainty about how the Western sanction response against Russia would impact the global economy (inflationary disruptions to energy supplies?). Meanwhile, Russia taking control over Ukraine would bring conflict right onto NATO borders (Poland), raising the risk of direct military escalation between NATO and Russia. Russia also might feel emboldened to exert pressure on the Baltic NATO nations that border it further to the north, raising the risk of a NATO/Russia clash in another arena.
Amid such high stakes, XAU/USD price action will continue to trade as a function of geopolitical developments while Fed commentary and US data takes a back seat. One notable trend in recent days, however, has been markets paring back on Fed tightening expectations somewhat given elevated geopolitical uncertainty. This has also likely been helping gold.