Gold: Will Safe-Haven Demand or a Rising US Dollar Decide the Next Move?

• Gold weakens as oil spike lifts the US dollar and Treasury yields above key levels.
• Safe haven demand from Middle East tensions limits downside despite rising yields.
• Key levels to watch remain $5000 support and $5150–$5200 resistance range.

Gold has started this week on the back foot, after prices suffered their first weekly drop since that plunge at the end of January. Prices tried to recover in the second half of last week but couldn’t wipe out the declines from earlier in the week.

This comes largely in response to the big spike we saw in oil prices, which helped lift both the US dollar and bond yields. With oil prices spiking above $100 today, this caused gold to drop again at the start of today’s session. Gold is therefore caught between a rock and a hard place: on the one hand, Middle East tensions are proving some haven flows, while on the other, rising US dollar and bond yields are providing headwinds.

Rising Yields and US Dollar Outweigh Haven Flows

Rising yields are usually a negative development for assets that pay no interest and cost money to store, such as gold and silver. However, in recent times gold has been able to hold its ground relatively well despite rising or elevated bond yields. Last week, though, that resilience faded somewhat. And at the start of today’s session, we saw the price of gold take another dip, which was hardly a surprise given the stronger US dollar and higher bond yields.

Gold did bounce off its earlier lows as the session wore on. However, it was still trading in negative territory at the time of writing.

So far, the impact of the oil price spike has had a mixed influence on gold prices. On the one hand, the resulting rally in bond yields and the US dollar has weighed on gold. On the other hand, safe-haven flows have continued to limit the downside. It is therefore possible that if oil prices were to come back down slightly — perhaps due to a coordinated release of strategic reserves — gold could push higher again.

All told, gold price action remains quite choppy and in consolidation mode, giving both bulls and bears plenty of opportunities to benefit from elevated volatility.

Gold Key Levels That Matter

For me, this is very much a level-to-level market, and it will likely remain that way until we see either a clear break above resistance or a breakdown below the key support levels holding the downside.

So, what are those levels?

Support is currently provided between the $5000 level and the $5050 area. We have seen several tests of this zone from the upside in recent days, and so far, it has held quite comfortably.

As long as we don’t see a decisive break below the $5000 level, the path of least resistance could still remain to the upside. Despite the strong recovery in the US dollar and bond yields, the underlying trend in gold has remained bullish throughout, making it difficult to argue against that view—especially with everything going on in the Middle East.

In terms of resistance, the key area to watch is between $5150 and around $5200. This zone has been tested multiple times following the breakout we saw last Tuesday, which initially looked like it might mark a turning point for gold.

However, we haven’t seen any meaningful downside follow-through since then. The fact that gold has held its ground suggests it may be trying to build a base around the $5000 level before potentially pushing higher again.

Let’s see whether the bulls can regain control. In the meantime, keep an eye on those levels mentioned, as they could determine the next near-term direction depending on whether we see a breakout or a breakdown.

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Disclaimer: This article is written for informational purposes only; it does not constitute a solicitation, offer, advice, counsel or recommendation to invest as such it is not intended to incentivize the purchase of assets in any way. I would like to remind you that any type of asset, is evaluated from multiple perspectives and is highly risky and therefore, any investment decision and the associated risk remains with the investor.

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