International gold prices experienced selling pressure during Asian trading on Friday, with spot gold (XAU/USD) falling to around $4,050, ending a streak of consecutive gains. Gold had earlier touched a two-month high, but as tensions in the Middle East pushed crude oil prices higher, markets began to reprice the inflationary pressures stemming from rising energy costs. The future path of the Federal Reserve's policy has consequently become a key factor influencing gold's trajectory.
Recent market risk aversion has significantly increased, primarily due to the expanding risk of conflict in the Middle East. Yemen's Houthi group stated that its forces attacked two Saudi oil tankers sailing in the Red Sea, claiming the vessels had violated its restrictions on Saudi ports. Concurrently, ongoing U.S. military operations against Iran have raised concerns that regional tensions could further escalate and create new shocks to global energy supplies.
Volatility in the oil market has become a central focus for financial markets. Given the Middle East's role as a critical global energy transport corridor, any disruption to supply chains could lead to renewed and rapid upward pressure on oil prices. There is growing market concern that rising energy costs will fuel global inflation expectations, potentially forcing the Fed to maintain a more restrictive monetary policy stance.
U.S. President Donald Trump stated that if the Houthis launch similar attacks again, the U.S. will take "massive military punishment" and indicated consideration of larger-scale action against Iran. These statements have further heightened concerns about regional risk escalation, prompting investors to reassess their allocations to risk assets.
The inflation anxiety triggered by rising oil prices is eroding the short-term appeal of gold. As a non-yielding asset, gold typically faces increased opportunity costs in a high-interest-rate environment. Current market data shows that investor expectations for a Fed rate cut this month have diminished, with pricing indicating a roughly 35.8% probability of a rate hike this month and an approximately 82.1% probability of at least a 25-basis-point hike by September. In this context, the U.S. dollar index has remained relatively strong, further limiting gold's upside potential. A stronger dollar typically increases the holding cost for dollar-denominated gold, leading some investors to reduce their allocation to precious metals. However, gold hasn't completely lost its support. Due to the persistent risks in the Middle East, market demand for safe-haven assets remains evident. Should energy supplies be more severely impacted, or should global financial market risk appetite decline sharply, gold could still attract capital inflows.
Some institutions believe the current macroeconomic environment does not support a sustained, large-scale rally in gold. Analysts point out that the prevailing U.S. interest rate and exchange rate environment remains unfavorable for investors to increase bullish gold positions. Particularly given that rising oil prices could further increase the likelihood of a Fed rate hike, gold's short-term upside potential appears constrained.
Investors are currently focusing on three key areas: first, whether the situation in the Middle East will continue to escalate; second, whether international oil prices will re-enter a phase of rapid increases; and third, the latest statements from Fed officials regarding the future path of interest rates. If energy prices continue to climb, inflationary pressure could re-emerge as the core trading logic for the market.
From a market performance perspective, gold is currently in a tug-of-war between safe-haven demand and high-interest-rate pressure. Geopolitical risks provide upward momentum, while a stronger dollar and Fed policy expectations limit the extent of any rebound, suggesting short-term prices may maintain a high-level consolidation pattern.
On the daily chart, spot gold surged after breaking out of its previous consolidation range but has now pulled back to around the $4,050 level, indicating that profit-taking from higher levels has begun. While the overall trend remains relatively strong, short-term momentum has weakened. If prices can hold near the $4,000 psychological support level, the bullish structure may continue, with upside resistance seen in the $4,100 to $4,120 zone. A break below $4,000 support, however, could lead to a further pullback towards the $4,950 area.
Looking at the 4-hour chart, gold experienced a technical pullback after hitting the two-month high. The short-term moving averages are beginning to flatten, and market momentum has shifted from strong to weak. The MACD indicator shows a contraction in upward momentum, while the RSI has retreated from overbought territory, suggesting increased short-term adjustment pressure. If prices can stabilize back above $4,070, a retest of the $4,100 resistance level is possible. If they continue to face selling pressure around $4,050, the effectiveness of the $4,000 support level will be a key focus.
Concluding Analysis
Gold's current price action reflects the market's ongoing process of rebalancing safe-haven demand against interest rate pressures. The escalation of the Middle East crisis and rising oil prices provide support for gold, but the increased risk of energy-driven inflation also raises the probability of the Fed maintaining a tight policy stance, thereby limiting gold's upside potential. In the near term, gold may continue to be supported by geopolitical risks, but the path of any rally will be heavily dependent on the market's repricing of Fed policy. If oil prices continue to climb and solidify rate hike expectations, gold may face continued oscillating adjustment pressure. Conversely, if risk events expand, leading to a significant surge in safe-haven demand, gold retains the potential to challenge higher levels again. Investors need to closely monitor developments in energy markets, the direction of the U.S. dollar, and signals from Fed policy, as these will determine gold's directional trend in the next phase.
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