Gold Price Forecast: XAU/USD braces for $2,000 as Ukraine conflict, inflation woes join steady yields

• Gold prices rise for the third consecutive day as buyers approach two-week high.
• Hidden bullish RSI divergence, break of short-term SMAs favor bulls.
• USD pullback adds strength to the upside momentum, yields, Fedspeak and Ukraine headlines are the key catalysts.
• Investors are aware of the Fed's bark, but are not pricing in their bite just yet

Gold (XAU/USD) remains on the front foot for the third consecutive day, taking the bids near $1,963 by the press time of Friday’s Asian session. The yellow metal rose to the fresh high in nearly two weeks the previous day amid escalating fears concerning the Ukraine-Russia war. The metal’s latest strength, however, could be linked to a pullback in the US dollar.

That said, The US Dollar Index (DXY) drops 0.30% intraday to 98.50 while snapping a two-day uptrend by the press time. The greenback’s latest weakness could be linked to the sluggish yields in Asia and the market’s inflation fears, as well as indecision concerning Ukraine’s struggle with Russia.

It’s worth noting that most of the global policymakers, not just from the Fed, have recently highlighted the inflation fears, which in turn underpins the gold’s safe-haven demand. The latest among the central bankers were from Japan. Also to note are the hints of a 0.50% rate hike by the US Federal Reserve (Fed) and chatters over the Quantitative Tightening (QT).

Elsewhere, a Senior US Official was quoted by Reuters saying, “Russia will emerge from Ukraine conflict weaker militarily and politically.” On the same line was a news piece from Reuters suggesting a lack of accuracy in Russia’s precision missiles and a likely dearth of the same in recent days. Australia and Japan also joined the West in sanctioning Russia and intensified fears over the Moscow-Kyiv woes.

On Thursday, US President Joe Biden pushed the European leader, the Group of Seven (G7) and North Atlantic Treaty Organization (NATO) members to announce more sanctions on Russia for its invasion of Ukraine. While his NATO friends could arrange battles guards for four of the Ukrainian cities and criticized Beijing’s ties with Moscow, the rest mostly refrained from major punitive actions against Russia.

Despite the escalating fears of inflation and the geopolitical woes from the Russia-Ukraine crisis, the latest measures do suggest a ray of hope for a positive turn in the peace talks between Moscow and Kyiv, which in turn requires gold traders to remain cautious.

Other than the geopolitical headlines and Fedspeak, covid updates and the US Pending Home Sales for February will also entertain gold traders.

Technical analysis

Gold prices stay comfortably beyond the 10-DMA and 21-DMA while justifying the hidden bullish RSI divergence on the daily chart. The oscillator pattern is formed when prices make higher low but RSI prints lower low, which in turn keeps XAU/USD buyers hopeful.

That said, the current upside eyed the 23.6% Fibonacci retracement (Fibo.) of December 2021 to March 2022 upside, around $1,995. However, the previous support line from early February, close to $2,000 by the press time, will challenge gold buyers afterward.

On the flip side, pullback moves may initially aim for a convergence of the 21-DMA and 38.2% Fibo. level surrounding $1,950.

Following that, the 10-DMA and 50% Fibonacci retracement level, close to $1,938 and $1,912 will challenge the gold sellers.

It’s worth noting that the XAU/USD bearish move remains elusive beyond the 50-DMA level of $1,888.

Gold: Daily chart

Trend: Further upside expected