Gold Price Analysis: XAU/USD is pressured into critical daily support area near $1,950

• Gold is lower despite risk-off themes at the start of the week. 
• Russia was on Ukraine is driving the sentiment and the US dollar higher.
• Gold to extend downward correction on hawkish Fed

As US yields rally to their highest levels since July 2019, the gold price is weakening in early afternoon US trade and is losing some 1.85% at the time of writing. XAU/USD has fallen from a high of $1,988.52 to a low of $1,949.74 so far, despite a risk-off theme at the start of the week. 

• US tells allies China signalled openness to provide Russia with military support

The focus remains on the Russian invasion of Ukraine. There are reports that the US has told allies that China signalled its willingness to provide military assistance to Russia, according to officials familiar with American diplomatic cables on the exchange.

Meanwhile, President Volodymyr Zelensky said his representatives were discussing a possible meeting with Russian leader Vladimir Putin, as negotiators noted some positive movement on issues of substance in recent days.

The fourth round of talks began on Monday morning, covering “peace, ceasefire, immediate withdrawal of troops [and] security guarantees”, according to Mykhailo Podolyak, an adviser to Zelensky. Podolyak later said the negotiations had been paused but would resume on Tuesday.

Taking to Twitter, Ukrainian President Volodymyr Zelenskyy's aide Mykhailo Podolyak said: "Again. Negotiations go non-stop in the format of video conferences. Working groups are constantly functioning. A large number of issues require constant attention."

However, diplomats remain sceptical about a breakthrough to end a war that has laid waste to Ukrainian cities, brought down devastating sanctions on Russia, and shaken world markets, ultimately sending the gold price to fresh cycle highs near $2,070/oz. 

Meanwhile, weighing on risk sentiment further, China is facing its worst COVID crisis since early 2020, when the world first witnessed an entire population locked down to contain the coronavirus in Wuhan and its surrounding province. Two years on, it's now sending tens of millions of people into lockdown in the entire northeastern province of Jilin, where 24 million people live, and the southern cities of Shenzhen and Dongguan, with 17.5 million and 10 million, respectively.

Looking ahead this week, the US Federal Reserve is widely expected to raise interest rates at its meeting ending on Wednesday, with investors pricing in a 99% chance of a 25 basis point hike. The last commentary from the Fed Chairman Jerome Powell flagged multiple rate hikes this year considering surging inflation. These expectations for progressive Fed rate hikes this year suggest it is set to remain the greenback well supported going forward. 

''Participants could also be expecting global central banks to ramp up their purchases following the West's aggressive sanctions on Russia, but official data have pointed to lacklustre flows in recent months,'' analysts at TD Securities said.

''Looking forward, the market has started to discount a future in which the growth shock could fade at a faster pace than the inflation shock, leaving gold prices vulnerable to a more hawkish Fed profile that could open the door to a deeper consolidation. For the time being, CTA trend followers still hold a substantial margin of safety for their length, but liquidations would be catalyzed below $1910/oz.''

Gold technical analysis

The trend is well established and the M-formation is a bullish reversion pattern that has formed on the daily chart. The neckline falls in near the highs of the day and would be expected to act as a resistance on a restest. However, should the bulls manage to overcome this area, there will be prospects of fresh highs for the foreseeible future. On the other hand, failures there will most probably lead to a restest of the current support in today's lows.