• Yellow metal drops amid firmer USD and hopes of progress in peace talks between Russia- Ukraine.
• Risk averse sentiment amid tensions between the West and Russia and indecision over the Moscow-Kyiw talks favors the greenback.
• Higher yields and interest rates increase the opportunity cost of holding non-yielding bullion.

Gold drops against the US dollar during Monday trading session since the dollar index gained and the US Treasury yields were firm near multi-month highs. Meanwhile, market is focused on the potential Russia-Ukraine peace talks this week which further weighs on the gold price.

The yields for the benchmark 10-year bonds in the US and Japan recently reached the highest levels since 2019 and 2016 respectively.

There is a hope for progress on the Russia-Ukraine peace talks, as negotiators meet for another round of talks in Turkey from March 28-30. However, Market sentiment remains risk averse because of tensions between the West and Russia additionally, indecision over the Moscow-Kyiw talks. The comments from US President Joe Biden suggesting the indirect threat to the Russian President Vladimir Putin weighs on the market sentiment although White House and Germany tried to reduce the fears.

Whereas, Ukrainian President Volodymyr Zelenskyy makes statement showing interest in peace talks, “We’re ready to discuss neutrality and non-nuclear status if security guarantees are provided.” However, his statements like, “Ukraine to insist on sovereignty and territorial integrity with talks with Russia,” poses a challenge to the odds of success.

The Fed raised borrowing costs for the first time in three years last week, and traders are pricing in a probability of a 50-basis-points rate hike during the policy meeting in May. Higher yields and interest rates increase the opportunity cost of holding non-yielding bullion. This further weighs on the yellow metal.

High bullion prices led some people to sell old jewellery in India last week amid dim physical gold demand, while a resurgence in COVID-19 cases in China hit purchases of the metal in the country. China’s financial hub of Shanghai launched a planned two-stage lockdown of the city of 26 million people on Monday to contain surging local COVID-19 cases. The rising cases of covid in china also weighed on the market sentiment.

XAU/USD 4 Hour Chart:

Support: 1945.7 (S1), 1933.8 (S2), 1924.4 (S3).

Resistance: 1966.9 (R1), 1976.3 (R2), 1988.2 (R3).

The Firmer USD amid sour market sentiment weighs on the non yielding bullion. We expect a bearish trend for XAU/USD.