The gold price has weakened from its recent highs above $2000 registered on March 08 as demand for the safe-haven assets was hit by hopes of progress in peace talks between Russia and Ukraine as well as the fallout from a U.S. interest rate hike.

The U.S. Federal Reserve hiked the main rate by 25 bps this week which positively influenced the U.S. dollar, and the appreciation of the U.S. dollar in the last several days had a negative influence on gold.

The U.S. central bank also surprised market participants with hawkish announcements for the upcoming meetings, and the U.S. central bank could move more aggressively if inflation remains high.

Federal Reserve Chair Jerome Powell also warned that the Russia-Ukraine conflict poses a risk to inflation, and rising U.S. interest rates tend to pressure gold since they increase the opportunity cost of holding the non-yielding asset.

Signs of progress in talks to end the war in Ukraine turned investors to think again about riskier assets.

Ukrainian President Volodymyr Zelensky said that negotiations are becoming “more realistic,” while Russia said that proposals under discussion are close to an agreement. David Jones, chief market strategist at Capital.com, said:

We have seen the invasion-driven momentum and speculative fury (for gold) massively cool off over the past ten days. Gold price is down 2.8% this week as optimism over the peace talks lifted sentiment in wider financial markets, denting demand for safe-haven assets.

On the other side, the price of gold could find support again if talks to end the war between Russia-Ukraine worsen.

U.S. President Joe Biden said to Chinese President Xi Jinping that there would be “consequences” if China offered material support to Russia’s invasion of Ukraine.

Technical analysis

Gold price has weakened from its recent highs above $2000 registered on March 08, and the current price stands at $1921.

Data source: tradingview.com

The price of this precious metal could find support again if talks to end the war between Russia-Ukraine worsen. If the price jumps above $1950, it would be a signal to trade gold, and we have the open way to $2000. 

The important support level stands at $1800, and if the price falls below this level, it would be a firm “sell” signal, and the next target could be around $1750.

Summary

The gold price remains under pressure after the U.S. central bank surprised market participants with hawkish announcements for the upcoming meetings. Demand for the safe-haven assets was also hit by hopes of progress in peace talks between Russia and Ukraine as Ukrainian President Volodymyr Zelensky said that negotiations are becoming “more realistic.”

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