Gold prices shed as much as 1% on Monday morning after closing above the psychological $2000 level last week. Prices later recovered thanks to a weaker dollar and heightened geopolitical tensions over Taiwan.

Appetite for the precious metal was hit by last Friday’s goldilocks US jobs report which boosted bets around the Federal Reserve raising rates by 25 basis points in May. US payrolls increased by 236k in March, printing in line with expectations while the unemployment rate dropped to near-record lows of 3.5%. The upwardly revised payrolls figure for February of 326k was the icing on the cake, as the overall jobs report eased concerns that the world’s largest economy is heading for a recession. Given how this development may offer support to the dollar and feed Fed hike expectations, gold bulls could be caged in the short term.

Nevertheless, gold prices have been on a tear over the past few weeks as the horrible combination of banking fears and recession concerns fuelled risk aversion. After securing a weekly close above the $2000 level for the first time since August 2020, the key question is whether bulls have what it takes to push prices to the all-time high at $2075.47. While the fundamentals favour further upside, bears could be inspired by the renewed focus on inflation as the banking turmoil cools. On the technical front, the relative strength index (RSI) is signaling that prices are overbought on both the daily and weekly timeframe.

Taking a quick peek at the technical picture, gold remains bullish with the weekly close above the $2000 level signaling further upside. However, anything could be on the table given how prices are flirting close to the 70 level on its 14-week RS1.

The lowdown….

The dollar found itself under renewed selling pressure early last week after disappointing economic data fuelled recession fears and slashed Fed hike bets.

This potent combination, along with falling Treasury yields was enough to propel gold way above the psychological $2000 level on Tuesday with prices reaching their highest level since March 2022 at $2032 mid-week. Gold struggled to preserve its bullish momentum on Thursday thanks to technical forces, with a stabilizing dollar amid risk aversion dragging prices back toward $2000. The recent price action re-confirms that this psychological level remains a pivotal point for bulls and bears. Expect the pending economic reports and risk events to influence whether gold concludes the week above or below this level.

All eyes on US CPI & Fed minutes 

It will be wise to keep an eye on the US CPI report published on Wednesday.

Inflation in the United States is projected to slow 5.2% in March year-on-year compared to the 6% figure witnessed in February. If expectations match reality, this will mark the ninth consecutive decline in inflation. However, all eyes will be on the Core CPI readings which exclude more volatile items such as food and energy. Core inflation year-on-year is expected to rise 5.6% in March compared to 5.5% in the previous month. Ultimately, persistent signs of easing inflationary pressures in the world’s largest economy may fuel speculation around the Fed pausing rate hikes sooner than expected. This could boost appetite for zero-yielding gold, pushing prices back towards $2032 and beyond.

Wednesday also sees the release of the Fed meeting minutes which concluded a 25-basis point rate hike. All eyes will be on the language of the minutes and whether any fresh clues are offered on future Fed rate moves. If the minutes strike a dovish tone similar to the March meeting, this could reinforce market expectations around the Fed’s hiking cycle nearing an end.

Other than the highly anticipated US CPI report and Fed meeting, there are key speeches from Fed officials and key economic data throughout the week that could influence gold prices. On the geopolitical front, heightened tensions around the Taiwan Strait has the potential to fuel risk aversion – supporting safe-haven assets.

Is gold heading for the all-time high?

Gold remains bullish on the daily charts as there have been consistently higher highs and higher lows. However, prices seem to be flirting around overbought conditions on the RSI. The weekly close above $2000 could encourage an incline back toward $2032. Beyond this point, the next levels of interest are $2070 and $2075. Should prices slip back under $2000, gold could retest $1950 and $1900, respectively.