XAU/USD remains firm around $1,910 as traders speculate on Russia’s next move

During a sluggish Asian session on Friday, gold (XAU/USD) maintains its late Thursday rebound from $1,878 around $1,910. The previous day’s market panic over Russia’s invasion of Ukraine propelled gold prices due to its traditional safe-haven status during early Thursday. However, by the volatile day’s end, mixed updates combined with a firmer US dollar to print a negative closing of the XAU/USD. The metal’s weakness late Thursday could be attributed to hopes of a halt in further casualties as the West signals its readiness to intervene and Russia indicates its willingness to discuss the “Terms of Ukraine’s surrender.”

The latest rebound could have been influenced by CNN’s report citing the Russian military’s readiness to bombard Kyiv, as well as remarks from Ukraine’s Envoy to Japan, who stated that the Ukrainian government had lost control of the Chernobyl nuclear power plant. In addition to the risk factors, the Fed’s key inflation indicator, the Core PCE Price Index for January, will be closely watched. Additionally, US Durable Goods Orders and Fedspeak can be of interest to gold traders.

Gold is trading near $1,900, down from Friday’s low of $1,878.10 and down from Thursday’s high of $1,974.48. The precious metal has regained some strength and is rising, but it is likely to face selling pressure near the $1,908 level. On Thursday, the precious metal plummeted with far greater velocities than it had displayed while scaling higher. The third law of motion appears to have kicked in, and the yellow metal fell like there was no tomorrow.

Despite the fact that the risk-off impulse remains intact as a result of the negative developments in the Russia-Ukraine war, investors have supported the US dollar against the precious metal. The rationale for the drop in gold prices can be attributed to rising bets on the Federal Reserve’s (Fed) aggressive tightening policy following the Russia-Ukraine crisis. The unstoppable rise in crude oil prices is expected to raise the prices of finished goods. Expectations of soaring inflation in an already high-inflation market may force central banks to take stringent measures to keep the situation under control.

Aside from the aggressive tightening of monetary policy, gold prices have been hammered by an increase in US GDP numbers and a slippage in weekly Initial Jobless Claims. The US GDP has increased to 7%, while initial jobless claims have decreased to 232K from 249K in the previous print. The US dollar index (DXY) has remained range bound since the United States announced sanctions against Russia in response to its military action in eastern Ukraine. Meanwhile, the 10-year US Treasury yield is currently trading at 1.97 percent.