Renewed Risk Appetite Capping Gold but Ukraine Fears Remain

Gold futures are edging lower on Wednesday as risk appetite improves as investors await further developments on the Ukraine crisis, while also preparing for global central banks to tighten policy by raising interest rates. Helping to put a lid on prices early in the session are firm Treasury yields, a steady U.S. Dollar and increased demand for equities.

At 13:02 GMT, April Comex gold futures are trading $1898.60, down $8.80 or -0.46%. This is down from yesterday’s multi-month high of $1918.30. On Tuesday, the SPDR Gold Shares ETF (GLD) settled at $177.45, up $0.33 or +0.19%.

Technically, the main trend is up, but the market is struggling to overcome a major long-term retracement zone at $1899.80 to $1951.00. Nonetheless, the main trend is expected to be well-supported all the way down to $1821.10.

Few Overnight Developments Out of Ukraine

There were no major developments in Ukraine overnight, but geopolitical tensions remained heightened.

Western nations on Tuesday imposed new sanctions on Russia for ordering troops into separatist regions of eastern Ukraine and threatened to go further if Moscow launched an all-out invasion of its neighbor.

Treasury Yields Rise Despite This Week’s Intensifying Russia-Ukraine Crisis

U.S. Treasury yields are trading higher on Wednesday, with investors selling out of the safe haven asset despite this week’s developments in the Russia-Ukraine crisis.

The yield on the benchmark 10-year Treasury note climbed 3 basis points to 1.9807% overnight. The yield on the 30-year Treasury bond moved 1 basis point higher at 2.2716%.

U.S. Treasury notes and bonds are safe-haven instruments as well as the Japanese Yen, U.S. Dollar and sometimes gold. Traders should monitor these three markets because gold is going to mirror their movement.

Safe Havens Yen, Franc Retreat, Kiwi Jumps after RBNZ Meeting

The U.S. Dollar was on the front foot against the safe-haven Japanese Yen and Swiss Franc on Wednesday, as whipsawed markets looked to get a handle on the latest developments around Ukraine, though heightened nervousness kept most major pairs fairly muted.

Away from the threat of a full-scale Russian invasion of Ukraine, the New Zealand Dollar jumped 0.44% after the Reserve Bank of New Zealand raised interest rates, and said more tightening could be necessary.

Short-Term Outlook

Although its momentum has slowed perhaps temporarily, gold prices are still quite elevated and investors remained poised to take prices much higher as the situation in Ukraine remains volatile.

However, should fears over geopolitical tensions over Ukraine subside, that would leave the Fed’s policy tightening path as gold’s primary driver.