International spot gold prices began the week with a technical rebound after touching a near-term low of $4,501, successfully holding the key psychological support level of $4,500. In the short term, gold prices are showing a pattern of volatile consolidation, with intensified battles between bulls and bears. The market's core logic revolves around the Middle East geopolitical stalemate, oil price fluctuations, Federal Reserve interest rate cut expectations, and US employment data.
Specifically, the geopolitical situation in the Middle East remains the core safe-haven variable supporting gold prices. The ongoing standoff between Iran and the US in the Strait of Hormuz, and its ambiguous state, continues to provide underlying safe-haven support for gold.
However, the interplay between oil prices and inflation continues to have a dual impact on gold. A sharp decline in international crude oil prices on May 5 temporarily eased market inflation concerns, somewhat weakening gold's appeal as an inflation hedge. Nevertheless, with oil prices still holding above $100 per barrel, high energy costs will gradually pass through to consumers, pushing up overall inflation levels and thereby limiting central banks' room for interest rate cuts, which in turn pressures non-yielding gold. This transmission chain—where geopolitical tensions push up oil prices, high oil prices constrain rate cuts, and high interest rates weigh on gold—keeps gold prices fluctuating within a range amid contradictory forces.
Movements in the US dollar and Treasury yields have further reinforced gold's consolidation pattern. The US dollar index traded within a narrow range yesterday, settling near 98.50, indicating a wait-and-see market stance. US Treasury yields edged lower, with the 10-year yield falling to 4.416%, but the five-year breakeven inflation rate hit its highest level since August 2022, signaling rising market expectations for medium-to-long-term inflation. At the start of the year, markets anticipated cumulative Fed rate cuts of 50 basis points by 2026; this expectation has now significantly diminished, with the persistent high-interest-rate environment continuing to suppress gold's upward momentum.
From a capital flow perspective, gold is facing noticeable competition from equities. Both the S&P 500 and Nasdaq indices reached new closing highs, led by gains in technology and artificial intelligence stocks, reflecting a significant recovery in market risk appetite. Capital is increasingly favoring high-growth assets.
Looking ahead, gold is expected to maintain a trading range between $4,500 and $4,850. The direction of a breakout will depend on two key variables. The first is the situation in the Strait of Hormuz; any escalation in conflict could trigger another surge in oil prices, fully activating gold's safe-haven attributes. The second is the upcoming US non-farm payrolls data for April. Market expectations are for an addition of 62,000 jobs. If the data comes in weaker than expected, rate cut expectations could reignite, potentially allowing gold prices to break above the current range resistance. Conversely, strong data would reinforce the high-rate pressure, possibly testing the $4,500 support level again.
Overall, the gold market is currently in a state of equilibrium between bullish and bearish forces, with solid support at $4,500 and significant resistance above $4,850. The market outlook hinges on developments in Middle East geopolitical tensions and the performance of US employment data. Investors should closely monitor these factors for clear directional signals and avoid impulsive trading based on short-term price movements.
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