Gold attracted some dip-buying near the $1,915 region, or the four-day low touched earlier this Monday and recovered a major part of its losses recorded on Friday. The XAU/USD held on to its modest intraday gains through the mid-European session and was last seen trading just below the $1,930 level. The market sentiment remains fragile amid fading hopes for a de-escalation in the Ukraine war and talk of additional sanctions on Russia. Germany and France said that a new round of sanctions targeting Russia was needed amid reports of war crimes in Ukraine. In fact, German Defence Minister Christine Lambrecht said the European Union should talk about ending Russian gas imports. This, in turn, was seen as a key factor that extended some support to the safe-haven precious metal.

That said, rising bets for a more aggressive policy tightening by the Fed kept a lid on any meaningful gains for the non-yielding yellow metal. The markets have been pricing in a 100 bps Fed rate hike move over the new two policy meetings, which was reinforced by stronger US monthly jobs report on Friday. This, in turn, pushed the yield on the two-year US government note – which is highly sensitive to rate hike expectations – to its highest since early 2019. Elevated US Treasury bond yields assisted the US dollar to build on its gains recorded over the past two trading sessions and scale higher for the third successive day. Stronger USD was seen as another factor that collaborate to cap the upside for the dollar-denominated gold and warrants caution for aggressive bulls.

Hence, the market focus will remain glued to the FOMC monetary policy meeting minutes, due for release on Wednesday. In the meantime, fresh developments surrounding the Russia-Ukraine saga will drive the broader market risk sentiment and provide some impetus to gold prices. Apart from this, traders will take cues from the US bond yields, which will influence the USD price dynamics and produce short-term opportunities around the XAU/USD.

Technical outlook

Gold has been oscillating in a familiar trading band over the past three weeks or so, forming a rectangle on short-term charts. Given the recent sharp pullback from the vicinity of the all-time high, the range-bound price action might still be categorized as a bearish consolidation phase. That said, repeated failures to find acceptance below the $1,900 round-figure mark make it prudent to wait for strong follow-through selling before positioning for any further decline.

From current levels, any subsequent move up is more likely to confront stiff resistance near the $1,940-$1,942 region. Sustained strength beyond has the potential to lift spot prices back towards the $1,964-$1,966 area. The momentum could further get extended towards the $1,986-$1,988 zone, above which bulls are likely to aim to reclaim the $2,000 psychological mark.

On the flip side, the daily low, around the $1,915 region, now seems to protect the immediate downside ahead of the $1,900-$1,890 area. A convincing break through the latter would set the stage for a slide towards the $1,872-$1.870 zone.

Gold daily chart