Gold set to cross $2,200 in March, as the dollar bears get into the act

Gold prices have been range-trading since the start of 2024. However, the prices jumped from $2,023 to $2,080 in the past week.

Saqib Iqbal, a financial analyst at Trading.Biz, thinks the current gold’s strength can continue in March, and the prices can go up to $2,200.

• Gold prices surged from $2,023 to $2,080 in the past week and are
•  looking to go towards the $2,200 level.
• The recent rally can be linked to lower US treasury yield and Fed rate cut expectations.
• Technically, the price has formed a bullish pattern, and the rally can continue.

He says, “Gold prices have held above the key $2,000 level since the start of the year amid geopolitical tensions, but the price has remained in a closed trading range due to the dollar’s strength. However, that pattern is changing amidst rate cuts expectations from the Feds.”

The present rally in gold prices occurred with the release of the February ISM manufacturing PMI, which revealed that activity levels had decreased faster, with readings on employment, inflation, and new orders decreasing from the previous month.

The US construction spending data coincided with the PMI survey, indicating a reduction in January. This led to a dramatic drop in US two-year Treasury note rates, weighing on the greenback. Given gold’s indirect correlation with the US 10-year Treasury yield, more dips in the longer-term US Treasury yield are anticipated to favour higher gold prices.

It’s also worth noting that for an asset whose value stems from its ability to hedge against inflation, the expectations for inflation when markets are pricing in additional Fed rate cuts might have been enough to drive gold’s unexpected advance.

In addition, according to World Gold Council figures, central bank demand was strong in the fourth quarter of 2023, adding 229 tons to worldwide official gold holdings.

This increased annual net demand to 1,037 tons, barely shy of the record set in 2022 of 1,082 tons, as reserve diversification and geopolitical worries prompted central banks to shift their allocation for safe assets.

The primary driving forces were the People’s Bank of China and the National Bank of Poland.

After the sudden jump on Friday, the price of gold is trading above $2080. Surprisingly, last week’s push produced a bullish candlestick pattern, a weekly bullish Marubozu just below $2,090. The price is trading above the 200-day moving average (MA).

The next resistance zone to keep an eye on after $2090 is $2210, followed by $2260.
On the other side, the next level of support is $2064. If the price breaches this level, it might fall to $2046.