Gold Price Analysis: XAU/USD falls back from $1900 level amid hopes for Ukraine crisis de-escalation

• Spot gold prices have come off the boil having failed to push above $1900 on Thursday/early Friday.
• XAU/USD has suffered from profit-taking amid hopes that talks between Russia and Ukraine next week might avert war in Ukraine.

Having failed to break convincingly above the $1900 level late on Thursday/during the early hours of Friday’s session, which incidentally was the precious metal’s highest levels since June 2021, spot gold (XAU/USD) prices have come off the boil on Friday. Spot prices have ebbed lower to trade near the $1890 mark, down slightly less than $10 or just under 0.5% on the day. News of another face-to-face meeting next week between US Secretary of State Anthony Blinken and Russian Foreign Minister Sergey Lavrov has spurred hope that a diplomatic solution might yet be found between NATO and Russia regarding the Ukraine stand-off.

US press reported that Lavrov agreed to attend talks on the condition that there would not be an invasion of Ukraine, easing fears of an imminent assault. Russian press also reported that there will be a call between the Russian Defense Minister and his US counterpart this Friday. Hopes that diplomacy might yet win through have undermined appetite for safe-havens like gold. If an invasion is really off the table until next week’s US/Russia talks (the timing of which remains uncertain), that could set the stage for some near-term profit-taking, with bulls perhaps looking to reload on long-positions upon the retest of support in the $1880 area.

But tensions between Ukraine armed forces and pro-Russia separatists in the country’s East remain elevated after the worst day of ceasefire violations since 2015 (so the press claimed) on Thursday. Moreover, Russia will be conducting military drills on Saturday that are to be personally overseen by Russian President Vladimir Putin. The scope for a significant pullback in gold thus remains slim for now, with strategists expecting, at the very least, the precious metal will remain supported in the upper $1800s whilst geopolitical uncertainty remains high.

Gold traders will also be keeping an eye on Fed speak on Friday from some influential policymakers including board of governors member Christopher Waller, Vice President Lael Brainard and NY Fed President John Williams. Markets will be looking to assess the degree to which there is a preference for a 25 or 50bps rate hike in March, as the views of these policymakers would likely reflect that of the mainstream at the Fed. For now, Fed tightening fears (which tend to be gold negative) look likely to continue to be outweighed by geopolitics.