Gold climbs back over $5,180 as Oil slump weighs on US Dollar

Gold Prices Surge as US Dollar Weakens Amid Falling Oil Prices

On Tuesday, gold (XAU/USD) experienced a notable increase as the US Dollar softened, following a drop in oil prices that highlighted the close relationship between the two assets. At the latest update, gold was trading at $5,187, marking a gain of over 0.5%.

Sharp Decline in Oil Prices Lifts XAU/USD on Hopes of Reduced Iran Tensions

Geopolitical developments remain a key influence on market movements. US President Donald Trump suggested that military actions in Iran could soon wind down. However, the Pentagon reported that Tuesday marked the most intense day of strikes in Iran, according to Secretary of Defense Pete Hegseth.

US crude oil, specifically West Texas Intermediate (WTI), plummeted by approximately 14% during the session, as speculation grew that the Iran conflict might be nearing resolution, according to statements from the White House.

The US Dollar Index (DXY), which tracks the dollar against a basket of six major currencies, managed to recover, rising by 0.14% to reach 98.86.

Meanwhile, G7 energy ministers convened and decided to postpone the release of strategic oil reserves, requesting the International Energy Agency (IEA) to evaluate the situation before making any further moves.

Market Outlook: Federal Reserve Policy and Economic Data

From a macroeconomic perspective, investors are anticipating a less dovish approach from the Federal Reserve, given the elevated energy prices driven by ongoing tensions in Iran. Current swaps market data from Prime Market Terminal suggests expectations of 40 basis points in rate cuts by year-end.

In other economic news, US Existing Home Sales rebounded in February, rising by 1.7% after a 5.9% decline in January. Labor market data also improved, with the four-week average for the US ADP Employment Change increasing to 15.5K from the previous 12.8K.

Upcoming US Inflation Report in the Spotlight

Attention now turns to Wednesday’s release of the US Consumer Price Index (CPI) for February, which will provide further insight into the Federal Reserve’s monetary policy direction. Headline CPI is expected to remain steady at 2.4% year-over-year, matching January’s figure, while Core CPI is also forecast to hold at 2.5% year-over-year.

Technical Analysis: Gold Maintains Bullish Momentum Above $5,100

Gold prices continue to fluctuate, lacking a clear trend due to ongoing geopolitical uncertainty, despite the metal’s traditional role as an inflation hedge.

Technically, XAU/USD is consolidating within the $5,100 to $5,250 range, with momentum indicators like the Relative Strength Index (RSI) favoring the bulls. However, buyers must overcome important resistance levels to unlock further gains.

• If gold surpasses the March 2 high at $5,419, the next target would be $5,500, with potential to challenge the all-time high near $5,600 if momentum continues.
• On the downside, a drop below $5,150 would bring $5,100 into focus as initial support. A further decline could expose the March 9 low at $5,014, followed by the 50-day Simple Moving Average (SMA) at $4,884.