During Monday's Asian trading session, the price of Gold (XAU/USD) remained under pressure, retreating to around $4,500. Although geopolitical risks in the Middle East continue to escalate, market concerns over inflation and rising interest rates are dampening safe-haven demand for gold, leading to overall weakness in the precious metals market.
U.S. President Donald Trump reiterated a tough stance toward Iran on Sunday, urging it to "act quickly" or face potential new consequences. Meanwhile, no significant breakthroughs have been made between the United States and a major Asian nation regarding trade concerns and Middle East issues, further heightening market risk aversion. However, unlike previous instances, this round of geopolitical risks has not broadly boosted gold prices but has instead spurred a rapid rise in crude oil prices. The increase in energy prices has reignited concerns about a potential resurgence in global inflation, directly impacting investors' assessments of the Federal Reserve's policy path.
Analyst Edward Meir from Marex noted that the major Asian nation has not provided significant assistance in easing the current situation, while rising crude oil prices are reinforcing market inflation logic, posing a clear downside risk for the gold market. The rise in international crude oil has strengthened inflation expectations, becoming a key factor suppressing gold.
The current market logic is shifting. Typically, geopolitical risks drive capital toward safe-haven assets like gold. However, if further geopolitical conflicts push energy prices higher, it could lead to a rebound in global inflation and prompt central banks to maintain higher interest rates. In a high-interest-rate environment, the appeal of gold, which does not offer interest income, significantly diminishes.
The United States has demanded that Iran abandon its nuclear program and reopen the Strait of Hormuz. Meanwhile, Iranian media reports that the U.S. has not made substantial concessions, and negotiations remain at a significant impasse. This suggests that the Middle East situation still carries the risk of further escalation in the short term.
The Strait of Hormuz handles approximately 20% of global seaborne crude oil shipments, and market concerns over supply risks continue to drive energy prices higher. As crude oil prices rise, global investors are reassessing future inflation trajectories. Rising energy costs not only impact transportation and manufacturing but may also push up global consumer price levels again. Consequently, the market is gradually reducing expectations for Federal Reserve rate cuts.
According to data from the CME FedWatch Tool, traders have largely ruled out the possibility of a Fed rate cut this year, while bets on further rate hikes are heating up. As a result, U.S. Treasury yields remain elevated, and the U.S. dollar index maintains a strong performance. The market has significantly lowered expectations for rate cuts this year, with the high-interest-rate environment suppressing gold buying.
From a market capital flow perspective, some funds are shifting from the gold market to U.S. dollar-denominated assets. Due to higher yields on the dollar, investors prefer allocating to high-yield assets rather than non-interest-bearing gold, which is a key reason for the recent sustained pressure on gold prices.
From a technical analysis perspective, gold has broken below short-term moving average support on the daily chart, with the overall trend shifting from a strong upward movement to high-level consolidation. The area around $4,500 is forming a new key support zone. If this level is breached, the market may further test the range between $4,480 and $4,450.
On the 4-hour chart, short-term bearish momentum for gold has strengthened. The MACD indicator has moved below the zero line, indicating a bearish short-term market sentiment, while the RSI indicator continues to decline, suggesting weakening bullish buying interest. However, given the persistent geopolitical risks, gold still retains some safe-haven support, and the market may maintain a high-volatility consolidation pattern in the short term.
Additionally, investors are monitoring upcoming U.S. inflation data and Federal Reserve officials' speeches. If future data indicate a resurgence in U.S. inflation, the market may further reinforce expectations of high interest rates, continuing to suppress gold prices.
Currently, the gold market faces a dual dynamic of "safe-haven support" and "high-interest-rate pressure." On one hand, escalating Middle East tensions boost market demand for safe havens. On the other hand, rising crude oil prices elevate inflation expectations and strengthen the likelihood of the Fed maintaining high interest rates, reducing gold's appeal. In the short term, interest rates and the U.S. dollar are dominating gold price movements. If energy prices continue to rise, the Fed's policy shift may be further delayed, and gold could face additional adjustment pressure. However, if geopolitical risks worsen further, safe-haven demand for gold may re-emerge.
Comments