Gold Price Forecast: XAU Fundamentals Look Bleak But Upside Potential Lingers

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Gold Price Forecast: XAU Fundamentals Look Bleak But Upside Potential Lingers

Gold prices were largely unchanged over the past 24 hours despite some weakness in the US Dollar. The yield curve flattened overnight, boosting riskier assets like equities. That also gave the advantaged to technology stocks on Wall Street. The yellow metal faces a tougher path higher ever since the Federal Reserve shifted to a more hawkish stance several weeks ago.

That hawkish shift has markets pricing in a more aggressive rate hiking schedule from the Federal Reserve, which has pushed breakeven rates lower. For now, it appears market participants believe the Fed will get a handle on inflation going forward. Even the Omicron variant doesn’t appear to be altering the current outlook. It will likely take a massive shock at this point to throw the Fed off course, which is unlikely.

This has invited widespread condemnation toward Russia, who experts believe may be planning an invasion. Such a move would likely trigger a crisis, one that could spark volatility in markets. The United States would likely levy heavy economic sanctions on Moscow if troops do cross over into Ukraine. Those sanctions could include limiting access to US bond markets and even possibly restricting access to the SWIFT banking system. That would bode well for gold.

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