Gold Struggles Near $5,000 As Oil Surge Caps Upside

Gold price consolidates on Tuesday during the North American session around the $5,000 level, down 0.11% amid broad US Dollar weakness and falling US Treasury yields. Higher Crude Oil prices, due to the Middle East conflict entering its third week, pushed bullion prices lower, as sellers eye a test of key support levels. At the time of writing, XAU/USD trades at $4,996.

Bullion stalls despite weaker Dollar and yields, with traders eyeing Fed decision

Bullion prices began the week on a lower note, even though the Iran war entered its third week, with no signs of a de-escalation in the short term. Nevertheless, the rise in Oil prices increased the US Dollar’s safe-haven appeal relative to Gold.

The US Dollar Index (DXY), which measures the Greenback’s value against six peers, is down 0.28% at 99.54. Even though the US Dollar is depreciating, traders have continued to book profits on Gold after the yellow metal spent the first half of March above the $5,000 threshold.

US Treasury bond yields are also falling, with the 10-year T-note yield down nearly two basis points to 4.2%.

Disruptions in the Strait of Hormuz are driving Oil prices higher. So far, Western Texas Intermediate (WTI), the US Crude Oil benchmark, has surged nearly 3% to $96.13 per barrel.

Data-wise, the US economic docket features jobs data, with the ADP Employment Change 4-week average edging lower from 14.75K to 9K. At the same time, Pending Home Sales for February improved sharply following January’s 1% contraction, and rose by 1.8% MoM.

Ahead, traders will eye the Federal Reserve’s monetary policy meeting, which began on Tuesday and is expected to end on Wednesday, with the monetary policy statement and the Summary of Economic Projections (SEP).

Money markets expect the Fed to keep rates unchanged at the March meeting, eyeing just 25 basis points of easing towards the end of the year. Following the Fed’s decision, investors eye the press conference by Federal Reserve Chair Jerome Powell.

Source: Prime Market Terminal

In the meantime, fears that inflation would rise due to the Iran war, alongside shipping disruptions in the Strait of Hormuz, prevented central banks from continuing to ease monetary policy.

XAU/USD Price Forecast: Gold tilted downwards, below $5,000

Gold price consolidates at around $5,000 ahead of the Federal Reserve’s meeting, with no signs of extending its gains past the $5,050 mark. On the downside, Bullion’s first key support level is the 50-day Simple Moving Average (SMA) at $4,952 before diving towards the $4,900 mark.

Momentum is tilted bearish, though the Relative Strength Index (RSI) is flattish, an indication of the lack of strength of buyers and sellers.

For a bullish resumption, XAU/USD must clear $5,050, followed by the March 10 daily high of $5,238. A breach of the latter will expose the $5,300 figure, with the next area of interest being $5,419, the March 2 cycle high.