The international gold market continued its corrective move during Tuesday's Asian trading session, with Spot Gold (XAU/USD) pulling back to around $4480. Despite persistently high geopolitical risks in the Middle East, gold failed to sustain its earlier strength. Instead, it faced downward pressure from a stronger US dollar and the market's reassessment of the Federal Reserve's policy trajectory.
The core dynamic in the gold market is currently shifting. Previously, escalating tensions in the Middle East drove significant safe-haven flows into gold, pushing prices to consecutive record highs. However, as energy prices surged rapidly, market focus has gradually shifted from safe-haven demand to inflation risks, placing new pressure on the precious metal.
Recent reports indicate Iran has decided to halt indirect negotiations with the US through third parties and plans to take stronger measures in response to the ongoing ceasefire disputes. Concurrently, tensions around the Strait of Hormuz have escalated again, significantly increasing market concerns over the security of the global energy supply chain.
The Strait of Hormuz handles approximately 20% of global seaborne crude oil shipments and a significant volume of liquefied natural gas exports. Any potential disruption could rapidly drive up international energy prices. The energy market has reacted noticeably, with international oil prices surging over 4% in a single day, prompting a market reassessment of global supply risks for the coming months. Against this backdrop of rebounding energy prices, investors are beginning to worry that the global disinflation trend could be disrupted.
Market analysts note that rising energy costs are reawakening concerns about imported inflation, which is a key factor pressuring gold recently. Typically, rising geopolitical risks are bullish for gold, but the current market logic has changed. When rising energy prices threaten to rekindle inflation, the probability of the Federal Reserve maintaining high interest rates or even tightening policy further also increases. Higher interest rates raise the opportunity cost of holding non-yielding assets like gold, thereby exerting downward pressure on its price.
Financial markets have already begun readjusting their expectations for Fed policy. The market believes that if inflation shows signs of resurgence in the coming months, the Fed might delay rate cuts or even reconsider a hiking path. Some market pricing suggests investors still see a possibility of a rate hike before year-end. As expectations for rate hikes gain traction, US Treasury yields remain elevated, providing support for the US Dollar Index. Since gold is priced in dollars, a stronger dollar typically reduces its attractiveness for holders of other currencies, capping gold's upside potential.
However, the gold market is not entirely without support. Significant uncertainty persists regarding the global economic outlook, and there are no clear signs of de-escalation in the Middle East, meaning safe-haven demand remains. Furthermore, upcoming US labor market data this week could serve as a crucial catalyst for gold's direction. Market attention is widely focused on Friday's US Non-Farm Payrolls report. If the data shows signs of a slowing labor market, it could weaken expectations for further Fed tightening, potentially weighing on the dollar and boosting gold. Conversely, persistently strong employment data could reinforce expectations for higher-for-longer rates, further pressuring gold prices.
From a technical perspective on the daily chart, gold has undergone a technical correction after hitting record highs, but the overall medium-to-long-term uptrend remains intact. The price is currently trading above the main moving average system, indicating the bullish structure is still in place. Although the MACD indicator shows signs of high-level divergence, it has not formed a definitive bearish crossover signal. The RSI indicator has retreated from overbought territory to around 65, suggesting short-term overheating sentiment is gradually subsiding. Key support levels to watch are around $4450, $4380, and $4300. Resistance levels are situated near $4520, $4580, and $4650. As long as the price holds above $4450, the medium-term uptrend is likely to persist.
Observing the 4-hour chart, gold has recently entered a consolidation phase at elevated levels. The MACD histogram continues to contract, indicating some weakening in short-term upward momentum. The RSI is hovering around the 50 level, suggesting a state of balance between bulls and bears. A break below the $4450 support zone could lead to a further short-term correction towards $4380. Conversely, a firm break and hold above $4520 could signal a resumption of the uptrend and another attempt at challenging the record highs. Overall, gold is in a short-term consolidation phase, but the long-term structure remains biased towards the upside.
Key Market Dynamics
The gold market is currently at a critical juncture, caught between competing forces of safe-haven demand and interest rate pressure. While escalating Middle East tensions should theoretically support gold, the inflation concerns stemming from rising energy prices have instead reinforced market expectations for the Fed to maintain high rates, becoming a primary reason for the recent price pullback. From a medium-to-long-term perspective, global geopolitical risks, central bank gold purchases, and slowing economic growth continue to provide fundamental support for gold. However, in the near term, Federal Reserve policy expectations and US economic data are likely to dominate market direction. This week's Non-Farm Payrolls report could be a pivotal turning point determining whether gold can regain its upward trajectory. Investors should closely monitor changes in employment figures, wage growth, and inflation expectations.
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