Gold Price Prediction: Analyst Forecasts Continued Rally on Dollar Weakness
Gold prices may extend their upward trajectory if the current weakness in the US dollar persists, according to Praveen Singh, Senior Fundamental Research Analyst for Currencies and Commodities at Mirae Asset Sharekhan. This outlook comes as the precious metal demonstrates robust performance amid a complex global economic and geopolitical landscape.
Recent Gold Performance and Market Drivers
In the week ending February 20, spot gold closed with a substantial weekly gain of nearly 1.2%, reaching $5,104. This increase was primarily driven by a combination of a weaker US dollar and escalating geopolitical risks in the Middle East. The metal surged approximately 2.1% on Friday alone, continuing its momentum into the following week.
On February 23, gold extended its gains, trading up by 1.50% at $5,182, buoyed by ongoing dollar weakness and tariff-related uncertainties clouding the near-term outlook for the US economy. In domestic markets, MCX Gold April futures rose by 2.21% to Rs 160,342, reflecting strong investor interest.
Supreme Court Ruling and Tariff Implications
A significant development occurred on February 20 when the US Supreme Court (SCOTUS) ruled 6-3 that former President Trump exceeded his authority in imposing a series of tariffs last year. The court determined that the International Emergency Economic Powers Act (IEEPA) did not explicitly authorize such measures.
In response, the president announced plans to implement a new global 15% tariff under Section 122 of the 1974 Trade Act, effective February 24, and initiate investigations for additional levies using different legal authorities. However, several questions remain unresolved, including whether the White House can replace tariffs with other legal tools or continue using emergency justifications for executive action. The European Union has expressed concern, urging the US to honor existing agreements amid this uncertainty.
Economic Data and Global Indicators
Recent economic data presents a mixed picture. US data released on Monday showed slight improvements: the Chicago Fed National Activity Index for January, along with durable goods and factory orders excluding transportation for December, were marginally better than expected. Germany's Ifo business climate index rose to 88.60, surpassing estimates of 88.30, benefiting from increased government spending.
However, the US annualized fourth-quarter advance GDP data, released on Friday, came in at 1.4%, significantly below the estimated 2.8% and down from 4.4% growth in Q3, partly due to reduced government spending during the shutdown. The GDP Price Index at 3.6% exceeded expectations of 2.8%, while inflation measures like the Core PCE Price Index rose 3% year-over-year in December, above forecasts. The University of Michigan Sentiment Index trailed initial readings, though inflation expectations eased slightly.
Eurozone and UK composite PMIs were positive, while Japan's nationwide CPI inflation cooled to 1.5% year-over-year, the slowest pace in nearly five years.
Geopolitical Tensions and Market Fundamentals
Ongoing US-Iran tensions remain a primary driver of gold prices, with a third round of nuclear talks scheduled for February 26 in Geneva. Iran has expressed openness to a deal if the US eases sanctions, while the US maintains all options, including potential military action.
Market fundamentals show strength: as of February 20, total known global gold ETF holdings stood at 100.16 million ounces, up approximately 1.20 million ounces year-to-date. Registered COMEX gold inventory at 17.17 million ounces is at its lowest level since September 2024.
CFTC data for the week ending February 17 revealed that money managers increased their bullish gold bets by 3,019 net-long positions to 96,057—the most bullish stance in three weeks. Long-only positions rose by 4,157 lots to 120,314, while short-only positions increased by 1,138 lots to 24,257, the highest in 12 weeks.
US Dollar, Yields, and Federal Reserve Commentary
At the time of reporting, ten-year US yields declined by 3.5 basis points to 4.05%, and two-year yields eased by 1.5 basis points to 3.46%. The US Dollar Index edged 0.20% lower to 97.60, having closed with a 0.13% loss at 97.80 on Friday, though it was up around 0.90% for the week ending February 20.
Federal Reserve Governor Waller indicated support for a 25-basis-point rate cut at the upcoming March meeting if the labor market weakens, noting that excluding tariff effects, US inflation is near the Fed's 2% target. Traders are closely monitoring revisions to January nonfarm payroll data.
Upcoming Data and Gold Price Outlook
Key US data this week includes weekly ADP employment change, Conference Board Consumer Confidence on February 24, and January PPI on February 27, alongside attention to Fed speakers. Germany's fourth-quarter final GDP and CPI on February 25 will also be in focus.
Spot gold, though somewhat stretched at current levels, continues to draw support from a weaker dollar, geopolitical worries, and tariff uncertainties. According to analysts, the yellow metal could target $5,450 if it manages to close above $5,150 for two consecutive sessions, with support levels at $5,100 and $5,000.
Disclaimer: Recommendations and views on the stock market, other asset classes, or personal finance management tips given by experts are their own. These opinions do not represent the views of The Times of India.
