Spot gold fell by more than 1.5% on Monday (March 28), and the market expected progress in the Russia-Ukraine peace talks this week, weakening the safe-haven charm of gold. In addition, a higher dollar index put pressure on gold prices. If the U.S. March nonfarm payrolls data due out this week is much higher than forecast, it is expected to strengthen the case for the Fed to raise interest rates by 50 basis points in May.
On Monday (March 28), spot gold fell by more than 1.5%, and the market expects that the peace talks between Russia and Ukraine may progress this week, weakening the safe-haven charm of gold. In addition , a higher dollar index put pressure on gold prices.
Russia, Ukraine prepare for talks in Turkey
Peace talks between Russia and Ukraine could start in Turkey on Tuesday, the Kremlin said on Monday, saying it was important that the talks would take place face-to-face despite little progress so far.
In a call with Putin on Sunday (March 27), Erdogan agreed to talks in Istanbul this week and called for a ceasefire and improved humanitarian conditions, Turkish President Recep Tayyip Erdogan's office said. Negotiators from Ukraine and Russia confirmed face-to-face talks would take place.
Ukrainian President Volodymyr Zelensky said on Sunday that Ukraine was willing to become neutral and compromise on the status of the eastern Donbas region as part of the peace deal. But another senior Ukrainian official accused Russia of aiming to divide the country in two.
A local leader of the self-styled Luhansk People's Republic said on Sunday that the region could soon hold a referendum on joining Russia. Oleg Nikolenko, a spokesman for the Ukrainian foreign ministry, dismissed claims of any referendum in eastern Ukraine.
If this week's Russia-Ukraine peace talks can make progress, gold is likely to fall further sharply in the short term, but given that sanctions against Russia are difficult to lift in the short term, gold prices are unlikely to fall below the previous low of $1,895.
Hard to say no to Russian energy
The European Central Bank 's stance of not rushing to raise interest rates may be tested when preliminary euro zone . Eurozone inflation is already at an all-time high of 5.9% and could hit 7% in the coming months. Given the ECB's target of 2 percent, it is not surprising that some officials are urging one or even two rate hikes this year.
Sanctioning Russian energy, as the US and UK have done, is one of the most powerful levers the EU can take. But OPEC has warned that the oil embargo could hurt consumers.
As pressure builds to announce the ban, a new twist has emerged - Russian President Vladimir Putin's request for "unfriendly" countries to buy gas in rubles has raised more concerns about Europe's energy shortage.
Europe relies on Russia for 40% of its natural gas supply, and soaring fuel prices have left Europe struggling. The debate over whether Europe can completely get rid of its dependence on Russian energy is causing anxiety among all parties and will limit the downside of gold.
Markets brace for Fed's more aggressive rate hikes
Important events that may affect the market this week are the U.S. March non-farm payrolls data to be released on Friday (April 1) to judge whether the U.S. economy is strong enough to respond to the Federal Reserve’s sharp interest rate hikes.
Economists polled expected 450,000 new jobs, down from a surge of 678,000 in February. If the actual data is much higher than forecast, it is expected to strengthen the case for the Fed to raise interest rates by 50 basis points in May. After all, Fed Chairman Jerome Powell has signaled his readiness to take more aggressive action if necessary.
Given that the market is already bracing for aggressive rate hikes this year, the impact of the non-farm payrolls is likely to be small. The USD short-term risk remains to the upside, but if we see any negative economic news, the USD could also see some correction.
Spot gold is expected to fall to $1922
On the daily line, the price of gold may start an upward ((iii)) wave trend from $1,895. On the hourly chart, the price of gold may start a retracement ii wave trend from $1966, falling below the 50% Fibonacci retracement level of the i wave at $1930, and is expected to test the 61.8% Fibonacci retracement level at $1922. Wave ii and wave i are both sub-waves of the up (i) wave started from $1895, (i) is the sub-wave of the up ((iii)) wave that also started from $1895, and the ((iii)) wave is It is a sub-wave of the up 5 wave that started at $1779.