XAU/USD Latest: Russia-Ukraine fears push gold higher

The escalation in tensions between Ukraine and Russia has seen safe haven flows increase this week. The rising threat of nuclear intervention from Russia has led investors towards assets like gold in an attempt to minimise their exposure to a potential panic selloff. It is important to highlight that we’re not there yet, the relative calmness in major global indices suggests that, but the threat is there, nonetheless.

The heavy selloff seen in gold (XAU/USD) following the US elections has started to reverse. The precious metal has kept a consistent bullish drive in the past four sessions, which has brought the RSI back above 50. There seems to be a bit of resistance in the push towards $2,670 as the 20-day and 50-day simple moving averages converge, but the bias is looking to remain higher for the rest of the week. 

Gold (XAU/USD) daily chart

Past performance is not a reliable indicator of future results.

It seems at present that Putin is just reminding the world that he has access to nuclear weapons - he’s done this in the past. Despite the initial rotation into safer investments, we are still seeing enough buying appetite in global equities to keep them supported around recent all-time highs, suggesting that investors are not yet placing too much weight on Russia’s threats. 

Going forward, it’s likely that we see gold prices supported even if the tensions in Eastern Europe seem to de-escalate. The constant threat of further military involvement is likely to keep investors interested in safe havens like gold. It is also true that the pullback over the last two weeks has helped rebalance overbought conditions, allowing for new buying appetite to appear.

That said, investors should be cautious over the coming months as there is still a lot to figure out regarding the US economy. Expectations that Republican policies could fuel inflation may see the Federal Reserve cut back on rate cuts over the coming 12 months, which could weigh on gold prices. Despite its traditional view as a hedge against inflation, higher rates weigh on gold as a non-yielding asset.