London spot gold traded within a narrow range overnight, while COMEX gold futures declined by 1% and SHFE gold dropped by 0.86%. Persistent Middle East conflicts prompted the International Energy Agency (IEA) to agree to release 400 million barrels from emergency strategic reserves. The United States has called on nations to assist in clearing the Strait of Hormuz, while several Middle Eastern countries are seeking alternative routes to resume crude oil exports. Overnight, oil prices fell sharply, reducing demand for the U.S. dollar as a safe-haven asset, leading gold to initially decline before recovering.
This week, the Federal Reserve's monetary policy direction is under close scrutiny, marking the first meeting since the U.S.-Iran conflict began. The surge in oil prices has already affected various asset classes, and Fed officials are expected to focus discussions on the impact of energy shocks on inflation and economic growth. Investors are watching for signs of when gold prices may re-enter an upward trend, remaining patient for the right timing.
On the geopolitical front, tensions between the U.S. and Iran continue. Last night, former President Trump hinted at possible attacks on Kharg Island oil facilities and called for European and other nations to provide escort services. However, other U.S. government officials have sought to reassure markets. For instance, Treasury Secretary Janet Yellen noted that the Strait of Hormuz faces supply challenges, and the U.S. government has tacitly allowed Iranian oil tankers passage to maintain global energy supply balance and prevent uncontrollable price spikes.
Additionally, the Federal Reserve's March policy meeting is scheduled for this week, with the interest rate decision and dot plot to be released early Thursday. Market expectations largely point to no change in rates, but attention will center on how Chair Powell assesses the "two-way risks" that surging oil prices—stemming from Middle East conflicts—pose to inflation and growth.
The U.S.-Iran conflict remains a key focus for gold trading. A strategy of buying on dips is recommended, as gold’s strategic allocation appeal is expected to strengthen regardless of whether inflation or stagflation expectations dominate in the future. Concerns over liquidity fluctuations may present investors with opportunities to accumulate gold at lower levels.
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