Gold Rally Gains Strength as Policy Uncertainty and Inflation Pressures Build

Since December, the Fed has held the funds rate steady at 4.25% to 4.5%. This signals a cautious stance due to trade war risks and inflation concerns. The FOMC dot plot shows a divided view—four members see no cuts, four expect one 25 basis point cut, and eight forecast 50 basis points in cuts. This uncertainty in monetary policy supports gold prices. When rate cuts remain uncertain, investors often shift to gold (XAU) as a safe-haven asset.

Financial market volatility further boosts gold’s appeal. Stocks came under pressure despite strong consumer spending. The uncertainty drove investors toward safer assets like gold, pushing it to new highs. Meanwhile, Germany’s DAX and Hong Kong’s Hang Seng Index also rallied, suggesting global investors seek value outside the US market. However, gold’s rally stands out, as it often performs well in uncertain and inflationary environments.

Moreover, inflation expectations are rising sharply. In February, the University of Michigan survey reported a jump in expected inflation to 3.1%, as shown in the chart below. This sharp rise in expectations increases demand for inflation hedges. Investors fear that rising prices may persist, reducing the actual value of currency and bonds. As a result, they move toward gold to preserve value. With both policy uncertainty and inflation concerns growing, the gold market remains supported by strong fundamentals.

Gold (XAU) Technical Analysis

Gold Daily Chart – Resistance

The daily chart for gold shows that the price has hit the ascending channel’s resistance while remaining overbought. However, the price has failed to show signs of correction at the record level. The consolidation within thin ranges indicates price strength and a break above $3,060 signals further upside. A correction from this level may find support around $2,950.

Gold 4-Hour Chart – Inverted Head and Shoulders

The 4-hour chart for gold shows the formation of an inverted head and shoulders, where the price has broken above $2,950 and initiated this surge. Gold has remained overbought since the breakout of $2,950, indicating that a price correction may follow. A correction from this region could ignite another rally in the gold market.

Treasury Yields (TNX) Technical Analysis

10-Year Treasury Note Yield Daily Chart – 200-Day SMA Support

The daily chart for US Treasury yields shows price consolidation above the key level of 4.10%. The Treasury yield remains above 4.10%, indicating that a break above 4.35% will initiate an upward rally. On the other hand, a break below 4.10% will signal further correction.

10-Year Treasury Note Yield 4-Hour Chart – Correction

These consolidations are observed on the 4-hour chart, which shows that the RSI has hit the mid-level and resulted in a correction from 4.35%. A break below the black dotted trendline at 4.10% will initiate another drop in US Treasury yields.

US Dollar (DXY) Technical Analysis

UD Dollar Daily – Positive Development

The daily chart for the US Dollar Index shows that the index rebounded from the 103.50 support level. The consolidation around this level indicates that the index may initiate a positive move from within the bearish trend. As long as the index remains below 105.20, the trend is likely to continue lower. This rebound may present an opportunity to sell the US dollar toward 100.65.

US Dollar 4-Hour Chart – Positive Development

The 4-hour chart for the US Dollar Index shows a buildup of positive momentum around 103.50. However, the overall trend remains downward. A break below 103.50 will initiate another strong drop in the US Dollar Index.