Risk aversion could reemerge at any point and drive the safe-haven yellow metal back to recent highs
Gold prices rallied to late-May highs around $1,913 on Tuesday before retreating amid profit-taking on Tuesday. The XAUUSD pair finished just below the $1,900 figure and has been retaining a bearish bias since the start of Wednesday trading hours. Still, the precious metal derives support from the $1.890 area, refraining from a deeper correction during the European session on Wednesday.
Yesterday, geopolitical tensions continued to escalate after Russia sent forces into Ukraine’s eastern regions. In turn, Germany decided to halt certification of the North Stream 2 pipeline while the UK imposed sanctions on several Russian banks and individuals. As risk aversion intensified amid these developments, the bullion jumped to the mentioned peaks but failed to confirm a decisive break above $1,900 and came under renewed pressure instead as the Eastern countries imposed less harsh sanctions on Moscow than feared. As such, following a bearish session on Wall Street, Asian equities rebounded, with European stock markets trading higher as well.
Still, tensions remain elevated after Putin ordered his forces into Ukraine to secure Donetsk and Lugansk rebel republics. In other words, risk aversion could reemerge at any point and drive the safe-haven yellow metal back to recent multi-month highs. Should the price regain $1,900, it could target May’s peaks at $1,916, followed by 2021 highs around $1,960.
In the immediate term, however, gold prices could stay on the defensive, with this week’s lows around $1,887 in focus. As long as the XAUUSD pair holds above this intermediate support zone, the $1,900 figure remains in the market focus. In case of a deeper bearish correction, the bullion would derail the $1,880 support region.
