GOLD Forecast: XAU/USD | Corrective Scenario Pullback | SHORT ⭐️

Modest recovery in the risk sentiment prompted some profit-taking around gold on Wednesday.
The worsening situation in Ukraine, stagflation fears should limit any meaningful corrective slide.
Softer USD/US bond yields should further lend some support to the dollar-denominated metal.
Gold edged lower through the early European session on Wednesday and was last seen hovering near the lower boundary of its intraday trading range, just below the $2,040 level. A goodish recovery in the equity markets turned out to be a key factor that prompted some profit-taking around the safe-haven XAU/USD. The risk sentiment stabilized a bit amid hopes for a positive outcome from the meeting between Russian and Ukrainian foreign ministers in Turkey on Thursday. The optimism, however, is likely to remain capped amid the risk of a further escalation in the tensions between Russian and Western powers.

In fact, US President Joe Biden on Tuesday imposed an immediate ban on Russian oil and other energy imports. The move was matched by Britain, announcing that it would phase out the import of Russian oil by the end of 2022. The Russian foreign ministry reportedly said on Wednesday that the response to the Western sanctions will be sensitive and precise. This, along with the recent monster gains in commodity prices that followed Russia's invasion of Ukraine, fueled fears about a major inflationary shock in the global economy. This should further act as a tailwind for gold, which has a proven historical ability to act as a hedge against inflation.

Apart from this, modest US dollar weakness and softer US Treasury bond yields could also lend some support to the dollar-denominated gold. Hence, it will be prudent to wait for strong follow-through selling before confirming that the XAU/USD has topped out and positioning for any meaningful corrective pullback. Nevertheless, the metal, for now, seems to have snapped four successive days of the winning streak to the highest level since August 2020 and remains at the mercy of developments surrounding the Russia-Ukraine saga.