Gold Price Analysis: XAU/USD finds base at $1850, advances pre-Fed minutes amid elevated geopolitical angst

• Spot gold found good support in the $1850 area and has advanced on Wednesday in the run-up to Fed minutes.
• Geopolitical angst regarding Russia/Ukraine remains elevated, underpinning gold, which is also being supported by technical factors.

As US/NATO officials continue to question the veracity of Russian claims that the country is now withdrawing troops from its border with Ukraine, markets remain nervous about the prospect of a flare-up in military tensions in the region. This is helping to keep spot gold (XAU/USD) prices supported above key support at the $1850 level. At current levels in the mid-$1860s, XAU/USD is trading with on-the-day gains of about 0.5%, unfazed by the latest US Retail Sales figures, which were much stronger than expected for January, though also saw hefty negative revisions to the December numbers.

As gold traders keep one eye on geopolitical developments in Eastern Europe, focus is increasingly shifting towards Wednesday’s release of the minutes from the January Fed policy meeting. Fed Chair Jerome Powell refused to rule out the possibility of a larger 25bps rate hike in March. In wake of recent Consumer and Producer Price Inflation data surprises as well as hawkish comments from some Fed policymakers (like James Bullard), US money markets have been increasingly leaning towards a 50bps move next month. The minutes will thus be scrutinised for any indications as to FOMC support for a larger 50bps rate hike.

The fact XAU/USD found solid support at the $1850 level on Wednesday is positive from a technical perspective. The precious metal recently broke to the north of a long-term pennant structure and in finding support at $1850, XAU/USD found support at the retest of the pennant. Technicians might thus now view a move back to multi-month highs in the $1880 area as highly likely and perhaps even a push on towards mid-2021 highs in the $1920 area. Should the geopolitical situation in Eastern Europe further soar, that would lend fundamental impetus to such a move.