Does the decline of the US dollar affect gold?
Market Volatility Surges
Market volatility spiked this week, with the VIX index reaching its highest levels in weeks. This increase follows growing clarity on Trump’s policy stance, which includes withholding support for Ukraine unless a peace agreement is reached and tightening tariffs on U.S. trading partners. While Trump defended this approach in his recent Congressional address, his administration has left the door open for negotiations to avoid tariff implementation if a more favourable trade deal can be reached.
Before the weekends, investor focus will shift to the U.S. jobs report, which will provide insights into the state of the labour market in February. Expectations suggest the U.S. economy may have added 150,000 jobs, an increase from January’s 143,000, while unemployment is projected to hold steady at 4.0%. Additionally, average hourly earnings are expected to remain in February at 4.1% year-over-year.
Impact on Federal Reserve Policy
U.S. labour market data plays a crucial role in shaping Federal Reserve policy, as the central bank is tasked with two key mandates:
Maintaining price stability by keeping inflation near 2%. Supporting maximum employment with low unemployment levels. Next week, the Consumer Price Index (CPI) report for February will be released, with forecasts indicating headline inflation at 3.0% and core inflation rising to 3.3%. If both the jobs report and inflation data come in higher than expected, the Federal Reserve may delay interest rate cuts into the second quarter of this year, strengthening the U.S. dollar while pressuring gold prices lower.
Key Levels to Watch in the Bearish Scenario
A daily close below $2,900 could signal the end of the uptrend, triggering a correction towards $2,790. In this case, a potential rebound at the February 28 low of $2,833 should be considered.Gold price – Daily Chart
Market volatility spiked this week, with the VIX index reaching its highest levels in weeks. This increase follows growing clarity on Trump’s policy stance, which includes withholding support for Ukraine unless a peace agreement is reached and tightening tariffs on U.S. trading partners. While Trump defended this approach in his recent Congressional address, his administration has left the door open for negotiations to avoid tariff implementation if a more favourable trade deal can be reached.
Gold price today after the dollar decline
Upcoming U.S. Jobs ReportBefore the weekends, investor focus will shift to the U.S. jobs report, which will provide insights into the state of the labour market in February. Expectations suggest the U.S. economy may have added 150,000 jobs, an increase from January’s 143,000, while unemployment is projected to hold steady at 4.0%. Additionally, average hourly earnings are expected to remain in February at 4.1% year-over-year.
Impact on Federal Reserve Policy
U.S. labour market data plays a crucial role in shaping Federal Reserve policy, as the central bank is tasked with two key mandates:
Maintaining price stability by keeping inflation near 2%. Supporting maximum employment with low unemployment levels. Next week, the Consumer Price Index (CPI) report for February will be released, with forecasts indicating headline inflation at 3.0% and core inflation rising to 3.3%. If both the jobs report and inflation data come in higher than expected, the Federal Reserve may delay interest rate cuts into the second quarter of this year, strengthening the U.S. dollar while pressuring gold prices lower.
Gold Prices – Uptrend Losing Momentum
On February 24, gold prices reached an all-time high of $2,956 per ounce before retreating due to profit-taking. Currently, gold is trading within the $2,900-$3,000 range and appears to be on the way for a test of the high end of this zone. However, resistance at the February 24 high should be monitored.Key Levels to Watch in the Bearish Scenario
A daily close below $2,900 could signal the end of the uptrend, triggering a correction towards $2,790. In this case, a potential rebound at the February 28 low of $2,833 should be considered.
Gold price – Daily Chart
Chart Source: ADSS Platform
