Gold witnessed an intraday pullback from the fresh multi-month high

: George Solotarov; 22 February 2022; Hits: 462

Gold witnessed an intraday pullback from the fresh multi-month high

Gold struggled to capitalize on its early modest gains to the highest level since early June 2021 and witnessed an intraday turnaround from the $1,914 region. The retracement slide extended through the European session and dragged spot prices below the $1,900 mark, though lacked follow-through. The sharp pullback could be attributed to some profit-taking amid a pickup in demand for the US dollar, which tends to undermine the dollar-denominated commodity. Apart from this, a modest recovery in the equity markets exerted additional downward pressure on the safe-haven precious metal.

The market's nervousness over the worsening Ukraine crisis eased after the Russian envoy to the United Nations, Vasily Nebenzya, said that they remain open to a diplomatic solution. That said, the risk of a further escalation in tensions between Russia and the West over Ukraine should act as a tailwind for gold and help limit any further losses.

From a technical perspective, slightly overbought RSI (14) on the daily chart seems to be the key factor that has prompted traders to lighten their bullish bets. Hence, any subsequent decline might still be seen as a buying opportunity near the $1,888-$1,887 region. This should help limit the downside near the $1,880-$1,877 horizontal zone. Failure to defend the said support levels could pave the way for an extension of the corrective slide towards the $1,855-$1,853 zone. The latter marks a downward-sloping trend-line resistance breakpoint, extending from June 2021, and should act as a strong base for gold prices. On the flip side, bulls might now wait for some follow-through buying beyond June 2021 high, around the $1,916 region before placing fresh bets. Gold could then accelerate the momentum and climb to the next relevant hurdle near the $1,930-$1.932 area.