Gold prices closed at $1996.60 after setting a high of $1974.90 and a low of $1931.50. GOLD extended its gains on Friday and surged higher despite the rising strength of the US dollar and the escalated geopolitical tensions. The US Dollar Index, which measures the greenback’s value against the basket of six major currencies, surged to 98.92 levels on Friday after surging for five consecutive sessions. Whereas the US Treasury yield on the benchmark 10-year note declined sharply on Friday to 1.69%, which added strength to the gold price.
Gold prices experienced their biggest spike in almost two years as they reached closer to the $2000 level. The main reason behind the spike was the worsening aggression of Russia towards Ukraine. The rising demand for safe havens and the declining Treasury yields boosted yellow metal gains.
Gold was also getting bets on the fears of higher inflation in the US amid the Russian invasion of Ukraine. The soaring inflation pushed gold because it is also considered a hedge against higher inflation. Gold has reached the long-awaited level of $2000, and some analysts believe that it will break this level soon.
Europe’s largest nuclear plant in Southeastern Ukraine triggered the safe-haven appeal. However, concerns have been raised about Russia’s ambitions to take control of all of Ukraine as its military campaign continues to make gains. The increased demand for safe-haven assets due to increased fear kept gold higher in the market.
On the data front, at 18:30 GMT, average hourly earnings fell to 0.0%, versus the expected 0.5%, weighing on the US dollar. The non-farm employment change surged to 678K against the predicted 407K and supported the US dollar. The unemployment rate also dropped to 3.8% against the forecast 3.9%, and supported the US dollar. Most data from the US side remained in favor of the dollar, which kept gold gains lower for the session.
The US dollar was also strong across the market as it was gaining bets due to its status as the global reserve currency. In the event of war or geopolitical tensions, the demand for global reserve currency rises, limiting yellow metal prices.
On Friday, New York Federal Reserve Bank President John Williams said that Russia’s invasion of Ukraine added uncertainty to the US economic outlook, which might boost near-term inflation. However, he thinks that household savings and strong economic growth will help limit the damage. He believed that inflation would eventually come down later this year, but it will remain well above the central bank’s 2% target. The Fed is expected to raise interest rates this month for the first time after the pandemic as US inflation is moving at a 40-year high level.
Gold Technical Outlook
Gold prices justify the latest bearish Doji on the four-hour chart as they retreat from multi-day highs amid overbought RSI conditions. However, pullback moves will be difficult to come by until the quote defies last week’s triangle breakout by falling below the previous resistance line of $1,928.
Ahead of that, the XAU/USD pullback may be tested by February’s high of $1,967. If gold prices fall below $1,928, the $1,900 level and an ascending support line from late January near $1,890 will put bears to the test before handing over control. The 200-SMA level of $1,860 also acts as a downside filter.
Alternatively, the January-February 61.8 percent Fibonacci Expansion (FE) near the $2,000 psychological magnet tests the metal’s immediate upside ahead of the theoretical target of last week’s triangle breakout near $2,030. Following that, the peak near $2,077 in August 2020 will be in focus.