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Gold Defies Strong Dollar to Retrace On Risk Outlook

Gold prices recovered some of its recent losses on Friday as investors looked to buttress their portfolios on the back of growing geopolitical pressure. Spot gold traded at $2167 per ounce, at the time of wring, up by 0.22% over Thursday’s closing price. Futures gold climbed  by 0.19% to trade at $2171. Notably, the commodity defied a recovering US dollar, which is on the rise courtesy of a positive jobs and PPI data.

Gold is making an attempt to return to the ascending trajectory after four days of decline following historic highs. Friday’s retracement is attributed to developments in the Russia-Ukraine and Israel-Hamas wars, which have been inflamed in the last two days. Russian President Vladimir Putin reiterated on Wednesday that the country would be prepared to use nuclear weapons if it felt that its sovereignty is threatened. Russia already moved tactical nuclear weapons in Belarus last year, and increased involvement of Western nations in the conflict increases the likelihood of a nuclear war.

In the Middle East, Israeli Prime Minister Benjamin Netanyahu brushed off the likelihood of a ceasefire in the Israel-Hamas war on Friday. Netanyahu has described Hamas’ demands as “unrealistic,” increasing the prospects of the war escalating in the Ramadhan period. There has also been a notable rise in harsh rhetoric regarding access to the Al-Aqsa mosque by Palestinians in the last few hours. The mosque is located at a contested site considered holy by Christians, Judaists and Muslims, and has been a source of deadly conflicts in the past.

Elsewhere, new home prices dropped by -1.4% year-on-year in February, doubling January’s figure of -0.7% and marking the worst decline in 13 months. This could provide some support for gold prices from investors exiting the China property market. Gold’s gains could however, be limited by US Treasuries, whose yields have returned near 4.300% on the 5-year and 10-year bonds.  

Technical analysis

Gold could continue its rebound if the buyers keep the price above the pivot price of $2,161.00. That would help them build momentum to break $2,174.00 resistance and target $2,179.00 in extension. However, the momentum could head to the downside if the sellers take charge below $2,161.00. With that, they could aim for the support at $2,156.00, beyond which the momentum could push to test $2,150.