Gold rebounds, silver up 5%; yellow metal must break out for upside: experts

Gold prices rebounded by more than 1% on Tuesday as a weaker dollar and easing oil prices supported market sentiments. 

Lowering the likelihood of a war-driven spike in inflation could lessen the chance of central banks increasing interest rates, which is beneficial for non-yielding gold.

Oil prices sharply declined, following reports that G-7 finance ministers were contemplating a substantial release of oil from strategic reserves, coupled with US President Donald Trump's remarks suggesting a swift end to the conflict.

Additionally, a 0.3% drop in the dollar's value resulted in greenback-priced bullion becoming more affordable for those holding other currencies.

Gold ​prices rose "due to the news flow from US President Trump himself, stating that there is ​a potential for de-escalation... So what we could see is that potential inflation expectation starts to tone down given this dramatic fall in oil price," said Kelvin Wong, a senior market analyst at OANDA.

Break out needed for upside

Experts believe that gold prices have to break out of its current range for further upside. 

Technically, gold has been consolidating over the last week, trading within a defined range.

Notably, it has found support just above the upward-sloping 200-period Exponential Moving Average (EMA), according to Haresh Menghani, editor at FXStreet. 

“Moreover, the near-term bias seems tilted mildly bullish as the gold price holds above the $5,010 confluence, keeping the broader uptrend structure intact,” Menghani said in a report. 

Immediate resistance on the upside is near the late-swing highs at $5,190, where previous advances were rejected. A stronger barrier exists at $5,230 should buyers push the price higher.

“A sustained hold above $5,140 would keep the bullish bias in play, while a break below $5,010 would weaken the upward outlook and shift focus back toward a corrective phase,” Menghani added. 

At the time of writing, the COMEX gold contract was at $5,179.34 per ounce, up 1.5% from the previous close.

Meanwhile, silver prices surged 5.3% to last trade at $89.005 an ounce. 

Fed rate cut uncertainty and selling pressure

Gold prices saw a drop of up to 2% on Monday.

This decline was driven by escalating energy costs, which intensified worries about inflation and further reduced the likelihood of an immediate interest rate reduction by the US Federal Reserve.

According to the CME Group's FedWatch tool, investors are anticipating the Fed will maintain current rates following its two-day meeting scheduled to conclude on March 18.

Despite being an inflation hedge, gold's appeal is boosted by low interest rates, as these reduce the opportunity cost of holding the zero-yield asset.

Market focus is currently on upcoming US inflation data: the consumer price index (CPI) for February, due on Wednesday, and the Personal Consumption Expenditures (PCE) index—the Federal Reserve's preferred inflation gauge—expected on Friday.

“The precious metal also faced selling pressure thanks to its role as a source of liquidity during recent equity market sell‑offs,” Ewa Manthey, commodities strategist at ING Group, said. 

“They had investors raising cash amid broader risk‑off conditions. While geopolitical risks offer underlying support, near‑term price action suggests macro forces are currently dominating.”