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Gold Whipsaws, Closely Follows News from Ukraine

This morning, news that Russia is ready to send a delegation to Minsk for Ukraine talks, sent the bullion further lower.

On Friday, the bullion was down 1% as traders took profits from the recent risk-off rally, which brought the metal to the highest level since September 2020.

On Thursday, gold rocketed to 1,960 USD amid the Russian invasion of Ukraine. However, sentiment improved during the US session, leading to massive profit-taking and bringing the price down 80 USD to 1,880 USD on Friday.

Diplomatic solution soon?

Some “optimistic” news came out today, suggesting Russia is ready to send a delegation to Minsk for Ukraine talks.

“As you know, today, the President of Ukraine Zelensky announced his readiness to discuss the neutral status of Ukraine,” Dmitry Peskov, Russian press secretary, said earlier today.

“Initially, Russian President Vladimir Putin said that the purpose of the operation was to help the LNR and the DNR, including through the demilitarization and denazification of Ukraine. And this, in fact, is an integral component of the neutral status.”

“In this context, in response to Zelensky’s proposal, Vladimir Putin is ready to send a Russian delegation to Minsk at the level of representatives of the Ministry of Defense, the Ministry of Foreign Affairs, and the presidential administration for negotiations with the Ukrainian delegation.

Focus on US macroeconomic data as well

Important US data were released earlier, including durable goods, private spending, and income numbers.

US durable goods orders rose to 1.6% monthly in January, up from 1.2% previously. The ex-defense gauge slowed to 1.6% from 2.7% (but above consensus of 0.1%). Finally, the ex-transportation orders fell to 0.7% from 0.9% (but also better than 0.4% expected.).

At the same time, US personal income fell to 0.0% month-on-month, down from 0.4% in December, while personal spending rose sharply from -0.8% to 2.1%.

Additionally, the Fed’s favorite inflation indicator – PCE Deflator – jumped to new cycle highs back to the early 80s. Core PCE rose 5.2% yearly as expected (up from +4.9% YoY in December), but the headline PCE Deflator rose 6.1% YoY (up from +5.8% prior and above the 6.0% expected).

Daily chart looks wild

Yesterday’s massive reversal bar does not bode well for the continuation of the uptrend. Should there be a further escalation in Ukraine, traders might push the bullion higher again. However, technically speaking, it looks like a correction to 1,870 USD might occur soon.

Gold daily chart, Source: Author´s analysis, tradingview.com

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