Gold prices surged early today, Friday, reaching $2,036.71 by 0751 GMT, building on previous gains, as strong support near $2,015 continues to hold firm. The precious metal has witnessed significant gains in light of escalating geopolitical tensions in the Red Sea.
U.S. dollar retreats
In addition to the tensions in the Red Sea, the U.S. dollar retreated despite a brief spike triggered by higher-than-expected U.S. Consumer Price Index (CPI) data. This has been a major factor in the increase in gold prices. The headline CPI rose 0.3 percent last month, with an annual gain of 3.4 percent, surpassing expectations. However, market sentiment leans towards a 70 percent probability of a March Federal Reserve interest rate cut due to concerns over the Chinese economic recovery and increasing geopolitical risks.
Read: Oil prices jump with continued shipping disruption in the Red Sea
Gold’s outlook
The short-term outlook for gold remains stable, fluctuating between the 21-day Simple Moving Average (SMA) and 50-day SMA at $2,045 and $2,016, respectively. Moreover, the 14-day Relative Strength Index (RSI) indicator suggests that gold buyers hold the upper hand. Additionally, the bullish crossover pattern between the 100- and 200-day SMA, confirmed last Friday, continues to support gold prices.
The immediate resistance for gold prices is at the 21-day SMA at $2,045, with the next target at Friday’s high of $2,054. A breach could open doors for a test of the $2,100 barrier. Conversely, gold sellers might find initial support at the $2,015 confluence, where the 50-day SMA and Monday’s low coincide. Hence, a daily close below this level is crucial for a potential downtrend resumption in gold prices towards the $2,000 mark.
Looking ahead, the gold market will closely watch the US Producer Price Index (PPI) data and the Federal Reserve’s moves. In addition, geopolitical developments will remain a central focus heading into the extended weekend, influencing gold’s short-term trajectory in the global market.
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