Gold Drifts Below $5k But Dollar Weakness Keeps Bulls in the Game
LONDON (February 17) Gold prices have started the week on the back foot, down around 2.5% on the week by the first half of Tuesday’s session. The losses have wiped out Friday’s notable rebound, which itself came after an even steeper sell-off the day before. XAU/USD initially traded around the $5,000 per ounce mark in early Monday trade, briefly pushing above that psychological level before drifting lower as the session progressed, and then extended those losses into Tuesday.
US traders will be coming back online, but China remains out. With key data to come towards the end of the week, we could be seeing some sideways, rather than trending, action for much of the week.
Analysis: What to Make of Gold at These Levels?
In many ways, the market now feels like it’s in consolidation mode following the burst of volatility we saw towards the end of January. With China on holiday for much of the week, liquidity is thin, and it remains unclear whether there is enough momentum to push prices significantly lower from here, or whether the dip buyers will be tempted to step back in given renewed weakness in the US dollar.
More broadly, traders are also still debating whether the late-January sell-off marked a meaningful top for gold. While dips have attracted buyers over the past couple of weeks, prices remain well below the extreme highs seen last month. That leaves the door open for some near-term weakness as investors unwind safe-haven positions and lock in profits while prices are still historically high. For now, though, gold remains broadly neutral rather than outright bearish.
Fundamentals: Losing Some Of Their Shine?
From a macro perspective, several of the drivers that pushed gold higher earlier in the year are beginning to lose momentum. While central bank buying remains supportive – with the People’s Bank of China continuing to add to its gold reserves for a fifteenth consecutive month – the broader narrative around US monetary policy has shifted.
Earlier in the year, gold benefited from expectations of aggressive US rate cuts. That tone changed after President Donald Trump named Kevin Warsh as the next Fed chair, a move markets interpreted as relatively hawkish. Since then, US data has been mixed, keeping traders guessing. A surprisingly strong nonfarm payrolls report was followed by softer CPI data last week, muddying the outlook for US interest rates.
So far, the US dollar hasn’t really capitalised on this hawkish repricing. But if the US dollar does start to strengthen, that would likely act as a headwind for precious metals, including gold.
Oil prices are another piece of the puzzle. After rallying sharply in January, WTI has cooled but seems to have found a base around the 200-day moving average near the $62–$63 area. Ongoing nuclear talks between the US and Iran add another layer of uncertainty. If oil resumes its uptrend, that could support the US dollar relative to energy-importing economies like the eurozone, which in turn would be negative for gold.
So, Where Does That Leave The Gold Forecast?
The recent volatility, including last Thursday’s sudden drop, doesn’t automatically mean gold is about to enter a sustained downtrend. However, it does raise the probability of continued choppy price action in the near term. A large pocket of downside liquidity has already been cleared, so the next directional move will depend heavily on how price behaves around key technical levels.
The main level to watch is still $5,000. If gold can reclaim and hold above that level in a more convincing way than its recent half-hearted attempts, that would be a constructive signal. In that scenario, the market could start targeting the upper end of the range again, with stops potentially sitting above $5,100.
On the flip side, if gold remains capped below $5K for much of this week, the risk of further downside increases. That would likely discourage bullish traders, especially if US data starts coming in stronger, the dollar stabilises, or geopolitical tensions continue to ease. All of those factors reduce demand for defensive assets and could tilt the direction clearly bearish.
In terms of support, the $4,880 area is the first line of defence for bulls. A clean break below that level could expose $4,800, followed by $4,700. Below there, $4,500 stands out as the key longer-term support zone and could come back into focus if selling pressure accelerates.
With gold swinging sharply in both directions, this is very much a market where discipline matters. Traders should work from level to level, define clear targets, and keep risk management front and centre. In an environment like this, volatility is an opportunity – but only if it’s handled properly.
Investing.com
