Hopes for a truce between Russia and Ukraine turned out to be very fragile. After yesterday's news, they crumbled like a house of cards. Against this background, gold has risen sharply in price.

The quotes of the precious metal jumped by $21 on Wednesday, reaching $1,939. In percentage terms, the difference from the previous close was 1.1%.

Recall that a day earlier, prices fell by 1.4% due to the appearance of signs of de-escalation of the Russian-Ukrainian confrontation. Representatives of the conflicting countries met on Tuesday in Turkey.

The result of the dialogue was Moscow's decision to significantly reduce military activity near Kiev and Chernihiv. Both sides also noted the productivity of this round of negotiations in comparison with the previous ones.

However, on Wednesday, the rhetoric changed dramatically to the opposite. So, Kremlin spokesman Dmitry Peskov told reporters that Russia had not noticed anything "really promising" in the proposals of Ukraine presented at the talks.

The head of the Chechen Republic, Ramzan Kadyrov, was more categorical in his statements. Yesterday he criticized the negotiations between Russia and Ukraine, saying that Moscow should not make any concessions and is obliged to bring the special operation to an end.

In turn, the President of Ukraine, Vladimir Zelensky, expressed doubt that the promise to withdraw part of the Russian troops could be considered as a serious breakthrough in relations between the countries, especially since there are still fighting near the Ukrainian capital.

The continuation of the fire, as well as the faded optimism about de-escalation, reduced the demand for risky assets. The US stock market closed lower on Wednesday, which supported gold quotes.

Another favorable factor for the yellow asset was the depreciation of the dollar. Despite the geopolitical tensions, the index of the protective currency fell by 0.6% yesterday, to an almost 2-week low. Pressure on the greenback was exerted by a deterioration in the estimate of US GDP growth for the fourth quarter.

Nevertheless, analysts do not discount the dollar, seeing excellent prospects for its growth against the background of hawkish comments from the Federal Reserve. Currently, the markets expect 7 interest rate hikes this year and two 50bps rises in the first half of the year.

The more aggressive course of the US central bank is one of the main obstacles for the precious metal on its way up. Tightening monetary policy reduces the attractiveness of bullion, which does not bring interest income, unlike US government bonds.

Now investors trading gold are in a difficult and unenviable position. They have to balance between 2 scenarios:

1) a potential drop in prices, which will occur in the event of an increase in rates by half a percentage point;

2) possible growth of quotes against the background of increased inflation risks and the threat of recession.

Uncertainty in macroeconomics and geopolitical uncertainty is what is now provoking strong volatility in the gold market. After yesterday's spectacular rise this morning, the value of the yellow asset has already fallen by 0.7% to $1,925.00.

– In the near future, the precious metal market will remain extremely unstable, – warns analyst Bernard Dahdah. – It will continue to react sharply to news headlines related to the conflict between Russia and Ukraine.

According to the expert, even if Moscow finishes the special operation from day to day, the sanctions imposed against it will remain in force for some time. This will keep commodity prices high and stimulate inflation for a long time to come.

Therefore, gold is likely to remain a winner in any case. And if the quotes decrease, then the fall will not be critical, Dahdah believes.