The last day of March was marked with positive results for the gold market. The precious metal closed the session in positive territory, showing gains for the month as well as the first quarter.
In the first half of the day on Thursday, gold was mostly trading in the red. The pressure came from a sharp decline in oil prices, which eased the market's fears about the acceleration of inflation.
Oil prices declined amid reports that US President Joe Biden is going to release up to 1 million barrels of oil per day from the US strategic reserves.
However, in the afternoon, the market sentiment changed to the opposite. Gold began to move steadily higher as Russian President Vladimir Putin threatened to stop gas supply if "unfriendly" foreign countries refuse to pay for it in rubles.
"In order to purchase Russian natural gas, they must open ruble accounts in Russian banks. It is from these accounts that payments will be made for gas delivered starting from tomorrow," the President of the Russian Federation explained.
Analysts say the Kremlin's decision poses a challenge to Europe and raises the risk of increased price pressure. This has spurred the demand for gold, which is a well-known hedge against inflation.
The yellow metal closed yesterday's session with a 0.8% gain, or $15, having settled at $1,954 per ounce.
"The latest Russian move on gas contracts suggests that a breakthrough in peace talks seems very far away," market analyst Edward Moya said.
The expert believes that as long as there is little progress in the ceasefire and de-escalation negotiations, gold will continue to rise.
However, gold may face serious resistance at $1,970. In case of a breakout, the price may head towards $2,000.
In February, when Russia started its special operation in Ukraine, the safe-haven asset developed an upside dynamic. In March, against the backdrop of growing geopolitical tensions, the price of gold managed to overcome the threshold of $2,000, for the first time since August 2020.
The military conflict in Eastern Europe, along with high inflation, brought massive volumes of liquidity into the gold market in the first month of spring. As a result, the price of the precious metal has jumped by 2.8%, securing great results for gold at the start of the year.
In the first three months of 2022, the yellow metal has advanced by 6.9%, its best quarterly result since July-September 2020. Notably, by the end of 2021, gold quotes dived by 3.7%.
Outlook for gold
In the second quarter of 2022, the military conflict in Eastern Europe and its impact on the global economy may still be dominating the sentiment of financial markets.
According to Mike McGlone, commodity strategist at Bloomberg, gold will maintain its upward dynamic for the most part of the year. It will be supported by such factors as a possible economic collapse in Russia and a threat of a recession in Europe and the US, which is indicated by the inverted yield curve.