The gold market comes under significant selling pressure as the price falls below $1,900 an ounce. Analysts warn traders that the precious metal may drop even lower in the near future.
The demand for gold as a safe-haven asset is decreasing as Russia and Ukraine have started a new round of peace talks in Turkey.
According to reports, Ukraine has proposed adopting a neutral status in exchange for security guarantees. At the same time, Russia announced that it would dramatically reduce its military operations near Kyiv and Chernihiv. But a complete cease-fire has not been declared yet.
Economists note that the latest peace talks created a risk-on environment as stock markets opened the North American session up by 1%. At the same time, gold fell below $1,900 per ounce.
However, despite selling pressure, Daniel Briesemann, a precious metals analyst at Commerzbank, noted that gold's rally is not over yet, especially if Russia and Ukraine fail to agree on a cease-fire.
Along with declining demand for gold, some analysts are closely watching the US dollar and Treasuries. The shift in the risk sentiment is also putting pressure on the US dollar index, which fell to a one-week low, down by 0.8% in a day.
At the same time, 10-year bonds yields were holding at 2.45%, also down by almost 1% in a day.
However, positive data from the US could give new momentum to the US dollar and push bond yields higher.
Traders are waiting for the nonfarm payrolls report for March which is due on Friday. According to forecasts, the US economy has added 485,000 new jobs.
In the current circumstances regarding peace talks and strong USD, gold prices could slide to the next key support level at $1,875.
Justin McQueen, the market strategist at DailyFX.co, believes that if support at $1,880 is broken, gold could drop to as low as $1,830 per ounce.
Despite significant volatility in the gold market in recent days, some analysts are not ready to give up on the precious metal. Many of them say that despite the conflict in Eastern Europe, gold will play an essential role as a portfolio diversifier as inflation continues to rise worldwide.
Bill Baruch, president of Blue Line Futures, said he was neutral on gold in the near term because peace talks took some momentum away from gold. However, the long-term outlook for gold remains bullish.