• Hawkish Fed is boosting the US dollar and weighing on gold.
• Federal reserve Brainard was hawkish on balance sheet reduction, and expect rate hike at aggressive pace.
• Geopolitics is at the focus after the EU announced new sanctions on Russia and Putin threatened restrictions on agricultural exports.

Gold is trading sideways as the US dollar weighed. The hawkish stance from the Fed policymakers favors the US dollar.

The Fed Vice Chair Brainard spoke of potential aggressive action from the Fed in anticipation of hawkish minutes. Brainard said the central bank could start reducing its balance sheet as soon as May and would be doing so at “a rapid pace.” He also added that interest rate hikes could come at a more aggressive pace than the typical increments of 0.25 percentage points.

The hawkish stance from various Fed policymakers in recent days raises the bar for a hawkish surprise from the minutes is high. But the direction of Fed policy remains clear, with the big question now how high the terminal rate will be. However, geopolitics and ongoing angst about the inflationary impact of the Russo-Ukraine conflict might be enough to keep gold supported.

The European Union talked up the prospect of more sanctions on Russian oil imports, and Russian President Vladimir Putin announced in response that he might look at restricting agricultural exports to so-called “unfriendly” countries (like those in the EU).

The ongoing geopolitical tensions and the upside risks posed to global commodity prices as a result of de-globalisation between the West and Russia continue to remain a key reason on why investors are attracted towards gold.  But A stronger dollar makes gold more expensive for the holders of non-USD currency, while higher yields increase the opportunity cost of holding non-yielding assets like precious metals.

XAU/USD 4 Hour Chart:

Support: 1912.0 (S1), 1901.4 (S2), 1885.2 (S3).

Resistance: 1938.8 (R1), 1955.1 (R2), 1965.7 (R3).

Fed speak will be the key catalysts for  gold traders to monitor,  In the meantime, Stronger US dollar weighs on Yellow metal, we expect a bearish trend for XAU/USD.