Mar 08, 2022 12:35AM ET
By: AnalysisWatch
On Tuesday, gold was purchased near the $1,980 mark, turning higher for the fourth day in a row. The drive drove spot prices further past the key psychological $2,000 mark in early European trade, the best level since August 2020.
Investors remain reluctant to reject riskier assets amid worries about the potential economic fallout from Russia's invasion of Ukraine. This, combined with the rising risk of deflation, weakened the already shaky risk sentiment and provided new impetus to the precious metal, which is regarded as a safe haven.
Apart from that, the recent surge could also be due to some bullish technical buying on a dampened US dollar, which usually benefits the greenback-denominated commodity.
However, increasing US bond yields could weigh on the low-yielding yellow metal and stop it from going up further. Nonetheless, the XAU/USD pair looks to have reaffirmed a new uptrend and should continue to advance. In the absence of major market-moving US economic data, recent developments related to the Russia-Ukraine saga are expected to open up some short-term trading possibilities.
After being unable to break past the key short-term hurdle around the $2,000 mark, gold (XAU/USD) recorded a minor decline at $1,990 at the beginning of Asian trading on Tuesday. However, the precious metal rose to its strongest level since late 2020 the preceding day, before falling back from $2,002.
While worries about a supply squeeze stay on the table and keep gold investors hopeful, the standoff over the ceasefire and human corridor during talks between Russia and Ukraine seems to be putting gold buyers to the test lately. Ukrainian officials said a Russian airstrike hit a bread factory in northern Ukraine on Monday, killing at least 13 civilians, while talks between Kyiv and Moscow made little progress towards easing the conflict.