• The yellow metal climbs higher amid the lack of progress in the Russia-Ukraine peace talks.
• A firmer dollar backed by hawkish Fed puts a cap on gold’s gains.
• Analyst say “Investor demand was also boosted by higher energy prices, which will put further pressure on inflation.”

The yellow metal trades high against the US dollar during Thursday trading session as inflation risks and the intensifying Ukraine crisis propped up demand for safe havens, although firmer dollar places a cap on gold’s gains.

Federal Open Market Committee member Loretta Mester is in favor of some 50bp hikes this year, and she also added that the economy has excess demand. However, She doubts rate hikes will cause a recession and that unwinding the balance sheet will help reduce distortions in the yield curve. Meanwhile, St. Louis Federal Reserve President James Bullard’s remains hawkish and comments that “US economy will continue to grow above trend this year and next.”

According to a Analyst, “High inflation is in favour of precious metals and it is not going to go away anytime soon,” Meanwhile rising bond yields were limiting the gains in gold and could force the metal to trade “sideways and choppy.”

Analysts at ANZ Bank said ”Investor demand was also boosted by higher energy prices, which will put further pressure on inflation. Adding to the positive backdrop was a fall in US bond yields. Bonds have been selling off amid hawkish comments from the Federal Reserve.”

Lack of progress in the  Russia-Ukraine peace negotiations makes the market sentiment sour. Italy’s Prime Minister Mario Draghi noted that Russia is not showing interest in a truce for successful peace talks. Separately, Russian Foreign Minister Sergei Lavrov said that talks with Ukraine are difficult as Kyiv is constantly changing its position.

Additionally, Russian President Vladimir Putin’s threat to switch certain gas sales to roubles sent European futures soaring on concerns the move would exacerbate an energy crunch and jam up deals that run to hundreds of millions of dollars every day.

XAU/USD 4 Hour Chart:

Support: 1923.2 (S1), 1903.0 (S2), 1890.4 (S3).

Resistance: 1956.1 (R1), 1968.7 (R2), 1988.9 (R3).

The bullion price is on firm ground amid the strong demand for safe-haven assets; we expect a bullish trend for XAU/USD.