Gold price slips; remains above critical level amid the Russia-Ukraine war

Gold price rose to its highest level in close to one week at $1,950.61 on Tuesday. However, it has since pulled back as the US dollar edges higher. As at 07:05 a.m GMT, it was at $1,935.91 per ounce. Despite the decline, the Russia-Ukraine crisis has supported the metal’s price above that a level that was previously an evasive since June 2021.

Fundamental analysis

In the just concluded month of February, the precious metal rallied by 6.5% as the conflicts in eastern Europe heightened its safe-haven demand. About a week ago, it rose to an 18-month high at $1,974.17.

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The recorded rise in the US dollar has curbed gold’s upward potential. Typically, the metal and commodities in general move inversely to the value of the greenback. At the time of writing, the dollar index, which tracks the value of the greenback against a basket of six major currencies, was at $97.69. At that level, it is close to the 20-month high hit in the past week at $97.73.

Even with the decline in early Wednesday trading, gold price has remained elevated above the psychological level of $1,900. Over the past two weeks, that level has been a crucial zone for the precious metal as investors remain glued to developments of the Russia-Ukraine conflict.

On Monday, officials from Russia and Ukraine met over a ceasefire. However, the talks did not yield much and no further rounds have been announced. In fact, recent news have indicated that Russian forces have heightened their attacks on key cities within Ukraine. This includes the western region of Zhytomyr and eastern area of Kharkiv. More people were killed by a Russian attack on a television tower in the Ukrainian capital city of Kyiv.   

In addition to the ongoing geopolitical tensions, gold price will also be reacting to Fed Chair’s testimony before the US Congress. The event, which is scheduled for Wednesday and Thursday, is expected to avail some clues on the central bank’s plan on hiking interest rates amid heightened inflationary pressures and the Russia-Ukraine crisis.

Data on ADP nonfarm employment change is set for release on Wednesday. Analysts expect a reading of 378,000 compared to the recorded decline of 301,000 in January. A higher-than-expected figure will likely boost the US dollar while curbing gold’s upward potential.