Posted 28th March 2022

Gold Drops Back on Hopes of Peace Ahead of Latest Talks Between Russia and Ukraine

gold feature header kinesis

With equities starting the week by making modest gains, gold is falling amid fragile optimism over peace talks between Ukraine and Russia with Ukrainian President Volodymyr Zelensky saying he is willing to discuss his country adopting a neutral status. 

This positivity that an end can be found to the bloodshed in Ukraine has reduced gold’s appeal as a haven asset.

On top of this, inflation is likely to be in sharp focus this week with Germany, France, Italy and the eurozone area all publishing their latest figures with high prints likely to increase the pressure on the European Central Bank to follow the lead of the US and UK and hike interest rates. 

The macroeconomic outlook in which central banks across the world are expected to make a series of interest rate increases over the course of the year will be a perennial headwind to gold’s ability to climb any higher.

gold kau kinesis exchange march 28
Gold ($/g) chart – 15-minutes – from Kinesis Exchange

However, while gold’s upside potential looks limited, the war in Ukraine also provides a firm floor for the precious metal.

So while the fact both sides are engaging in talks is a positive sign, until those talks successfully bring an end to the fighting, investors will be unlikely to fully unwind the fear trades placed following Russia’s initial invasion.

With both a strong floor and ceiling in place for gold, the price is likely to remain within $1,900-$2,000 an ounce for the foreseeable future.

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