Spot gold's decline is limited, the market cautiously awaits the Russia-Ukraine peace talks, and the bulls have another solid backing.

Spot gold on Thursday, March 31 was under pressure due to a rebound in the US dollar However, the decline in gold prices was limited. The market is cautiously optimistic that the war in Ukraine may enter a new phase of de-escalation, while supply chain disruptions caused by the war are expected to continue to support gold's appeal as a hedge against inflation.

As of 19:57 Beijing time, spot gold fell 0.09% to $1930.67 per ounce; the COMEX gold futures contract fell 0.20% to $1935.2 per ounce; The US dollar index (98.3958, 0.0407,  rose 0.36% to 98.183. ) rose 0.36% to 98.183.

Difficult progress in peace talks  

Peace talks held in Istanbul this week Russia said it would reduce its operations near the capital Kyiv and the northern city of Chernihiv to build trust.   Russia's chief negotiator, Vladimir Medinsky, said on Wednesday that Ukraine had expressed its willingness to meet Russia's core demands,

However, Ukraine and its Western allies see Russia's commitment as a means of preventing losses and preparing for further attacks. Ukrainian President Zelensky said on Thursday that Ukrainian forces are preparing for a possible new attack by Russia in the east of the country. Medinsky also stressed that Russia's position on the Donbas region and Crimea has not changed.

The Kremlin on Wednesday welcomed Kyiv's written proposals to end the conflict in Ukraine, but said there were no signs of a breakthrough yet. Spokesman Peskov told reporters that Russia had not noticed anything truly promising or that looked like a breakthrough, and said there was still a long way to go.

Given that Russian forces are preparing for a new offensive in eastern Ukraine, the market is cautious about the prospects for the implementation of the Russia-Ukraine peace talks, and the subsequent resumption of peace talks is unlikely to quickly resolve the issue, limiting the decline in gold prices.

Inflation is expected to continue to surge

Russian President Putin previously said he wanted "unfriendly" countries, including EU members, to use Rubles to pay for natural gas, a demand that has been rejected by Western countries. The EU currently receives 40% of its natural gas supply from Russia.

Russian lawmakers have even suggested that Russia could expand its demand for ruble payments for other commodities, including oil, grains, fertilizers, coal and metals, increasing the risk that further surges in commodity prices could lead to a global recession.

Brian Lan, managing director of GoldSilver Central, said that in addition to the Ukraine crisis, concerns about high inflation and whether major central banks can successfully control inflation are putting pressure on the economy and helping gold perform well.

Michael McCarthy, chief strategist at Australia Tiger Brokers, said: "Gold traders are weighing geopolitical risks and the potential for further inflation, and the prospect of continuing to hold gold as central banks raise interest rates."

Decline in the global status of the US dollar

A senior US government official said that India's massive increase in oil imports from Russia could put India at "significant risk," and the US is preparing to step up sanctions against Russia.

Sources said the European Commission is preparing new sanctions against the Kremlin for the invasion of Ukraine, which could be ready as early as next week. The intensity of the new sanctions will depend on Russia's stance on paying for natural gas in rubles.

Gita Gopinath, First Deputy Managing Director of the International Monetary Fund (IMF), told the Financial Times (FT) that financial sanctions against Russia could gradually weaken the dollar's dominance and could lead to a more fragmented international monetary system.

In an interview with the Financial Times, Gopinath said: "The dollar will remain the main global currency, but fragmentation at a smaller level is certainly possible." She added that some countries are already renegotiating the currencies in which they are paid for trade.

Since Russia lifted the 20% VAT on personal gold purchases on March 1, Russia's second-largest bank, VTB, has sold one tonne of gold to customers this month and expects demand to continue to increase. Dmitriy Breytenbikher, senior vice president of the bank, said in a statement that investors are diversifying their portfolios, preserving assets and saving for the next generation in the face of "increased uncertainty" by buying gold.

Spot gold could rise to $1958

From a daily perspective, gold prices may have started an upward ((iii)) wave from $1889, with resistance at the 23.6% target of $1958. The ((iii)) wave is a sub-wave of the upward 5-wave starting at $1779.