Gold finds footing at $5,000

Gold prices are now hovering around the key support level of $5,000 per troy ounce. From a technical standpoint, a rebound appears likely. The underlying power of this floor and momentum indicators underpin this scenario. Specifically, the Relative Strength Index (RSI) has just climbed above 50 from neutral territory—a potential sign of an emerging uptrend.

However, the fundamental backdrop tells a more bearish story. Let’s break it down, starting with the Middle East turbulence and the blockage of the world’s vital commodity artery—the Strait of Hormuz. These developments have led to an impressive rise in energy quotes, sending ripples through global inflation expectations, especially in the United States. Traders have revised their forecasts, now pricing in the likelihood that interest rates will stay higher for longer. These projections, in turn, have made waves across financial markets. The dollar index (DXY), which measures the greenback against six major peers, has surged by more than 2% since early March. US Treasury yields have also skyrocketed. At the same time, gold's appeal tends to fade, as it struggles to compete with traditional dollar-denominated assets. Demand for precious metals typically cools under such circumstances.

The Federal Reserve (Fed) meeting on March 18 is likely to gain lots of attention—though the interest rate decision itself may not take center stage. Traders will be far more focused on updated macroeconomic forecasts and Chair Jerome Powell’s policy signals. If US officials strike a hawkish tone, promising higher rates for longer to tame stubborn inflation, the greenback and American bonds could strengthen further. That would be bad news for gold in the short run. On the flip side, dovish comments or concerns over an economic slowdown could send the dollar lower and boost demand for bullion as a safe haven.

That said, it’s worth remembering that most of the aforementioned risks, such as geopolitical tensions and heightened inflation, have already been priced in by the market. As a result, even neutral or mildly negative signals from the Fed could trigger a short-term rally in the precious metal instead of a sell-off, effectively reversing the “buy on rumors, sell on facts” scenario.

The final recommendation is to buy gold at the current price, targeting $5,200 per troy ounce within the next one to two weeks. To mitigate the risk of adverse market movements, place a Stop Loss order slightly below the support level, or around $4,950.