Author: Mr.Amar – Technical Analyst
Gold extended losses after posting its biggest drop in 14 months as risk sentiment improved after signs Ukraine was ready for a diplomatic solution with Russia. Bullion pared some of its gains this year as safe-haven demand eased after comments from a senior foreign policy adviser to President Volodymyr Zelenskiy. The official said Ukraine is ready to discuss Russia’s demand for neutrality as long as there are security guarantees, even though it won. They won’t give up an inch of territory. The precious metal and several other commodities, such as oil, are off their recent highs, although concerns linger about the risk of an inflationary shock to the global economy as the Federal Reserve prepares to hike interest rates. Investors continue to turn to gold as a store of value, with holdings in precious metals.
However, it remains highly uncertain when fighting in Ukraine will subside. That leaves gold with the potential to regain its recent strength when current optimism fades. Meanwhile, traders are preparing for the United States to release its latest Consumer Price Index (CPI). February dates. Analysts expect the US inflation rate to rise to 7.9%. That would be the highest year-on-year since January 1982, when inflation was 8.4%. A higher than expected number may contribute to ongoing inflation problems, which could lead to a spike in precious metals prices. Such a move could be compounded by concerns that the war in Ukraine could prompt the US Federal Reserve to rein in a more aggressive response to price growth to cushion the impact of widespread economic instability linked to the crisis.
Technically, Gold prices have fallen to a known area of resistance, which is currently acting as support. While the drop in a single day was of a magnitude that could not have been predicted, it fell from levels previously flagged as significant. Gold may correct sharply only once there are concrete efforts to resolve the Russia-Ukraine standoff.