XAU/USD maintains small advances near $1,925, but lacks follow-through

Gold crept up in the early hours of Monday trade, but there was little follow-through purchasing or strong positive confidence. There appears to be no end in sight to Ukraine’s prolonged conflict, which has rejected Russia’s offers to hand up the port city of Mariupol. The deteriorating geopolitical environment put investors on edge, lending some support to the safe-haven precious metal. However, the advent of some US dollar buying worked as a headwind for the commodity priced in US dollars.

The fact that the Fed signalled last week that it may hike rates at all six remaining meetings in 2022 continues to bolster the buck. This, together with increased hawkish statements from important FOMC members and higher US Treasury bond rates, supported the dollar while limiting gains for non-yielding yellow gold. Nonetheless, the metal has managed to keep its head above the $1,920 level so far, as market players await Fed Chair Jerome Powell’s scheduled address later in the US session.

Traders will take cues from new developments in the Russia-Ukraine storey, which will play a significant role in determining market risk sentiment. Aside from that, the USD price dynamics should offer some push to gold in the absence of any market changing economic releases from the US. As earlier update Gold (XAU/USD) is licking its wounds at $1,928, up 0.30 percent intraday during the Asian session on Monday. The yellow gold suffered its largest weekly drop since June 2021, as market confidence strengthened during the previous week, impacting on the bullion’s safe-haven demand. However, Ukraine’s rejection of Russia’s capitulation demand in Mariupol has reignited risk aversion.

In addition to Kyiv’s willingness to fight in Mariupol, increased shelling in Ukraine by Russian soldiers reflects the bleak situation. The Chinese Envoy recently expressed willingness to de-escalate the conflict in Ukraine, but markets remain sceptical, as the past week’s discussion between US President Joe Biden and his Chinese counterpart Xi Jinping failed to deliver any important specifics on the critical topic. On the contrary, the debate over Taiwan heightened Sino-American tensions, reviving gold’s safe-haven demand. Other factors influencing market mood include rising covid numbers in China and the suspension of trade in Hong Kong by struggling real estate giant Evergrande. It’s worth mentioning that the People’s Bank of China (PBOC) kept benchmark interest rates steady, as expected by the market. According to the most recent policy adjustment, the one-year Loan Prime Rate (LPR) stayed steady at 3.7 percent, while the five-year equivalent remained fixed at 4.6 percent. Against this backdrop, the S&P 500 Futures falls 0.28 percent intraday, while Asia-Pacific stocks trade neutral due to a vacation in Japan and a light calendar elsewhere.

In the near future, US President Joe Biden will speak with the leaders of France, Germany, Italy, and the United Kingdom. Given the new escalation in the Ukraine-Russia conflict, lawmakers may put additional pressure on Moscow, which might boost the XAU/USD. A speech by Fed Chair Jerome Powell is also expected to influence gold prices for the day. If Powell continues to see a negative risk to inflation in the future, the US dollar’s weakening may contribute to the metal’s recent gains.