Gold Price Analysis: XAU/USD relatively calm in the $1900 area as US data eyed, Russia/Ukraine war rumbles on

• Gold traders are taking a breather on Friday after Thursday’s big moves, with prices near flat in the $1900 area.
• Focus remains on the Russia/Ukraine war as fighting intensifies and the West mulls further sanctions.
• Upcoming US data will also be closely watched for any implications for Fed tightening expectations.

Even as the fighting between Russian and Ukrainian military forces all across Ukraine intensifies, market participants appear to be taking somewhat of a breather on Friday after an exhaustive last few days of extreme volatility. That seems to be the case in spot gold (XAU/USD) markets, anyway, with prices currently trading just above the $1900 level and near the mid-point of Friday’s $1890-$1920ish ranges so far. That compares to Thursday’s near $100 intra-day swing from highs to lows after XAU/USD pulled back abruptly from multi-month highs in the $1970s to sub-$1880 lows.

Upcoming US Core PCE inflation data for January might stir things up a little if it surprises to the upside and challenges the recent shift in the market’s view towards the March Fed meeting. In wake of the rise of geopolitical uncertainty in Europe and subsequently cautious commentary from some Fed policymakers on Thursday, markets have taken the view that a 50bps rate hike next month is very unlikely. However, influential Fed Board of Governors member Christopher Waller said on Friday that he wanted to see 100bps of tightening by the middle of the year (endorsing James Bullard’s view) and that there is a strong case for a 50bps March hike.

Even if hot US inflation does restoke Fed tightening bets somewhat, thus perhaps exerting putting upside pressure on US yields and on the US dollar, gold seems likely to continue to be supported by geopolitical risk premia for now. Goldman Sachs said on Friday that the gold rally has much further to go and that if demand for gold ETFs picks up sufficiently, prices could hit fresh record highs in the $2300s.