During the Asian session on Thursday, May 21, spot gold traded within a narrow range around $4560, with market sentiment turning cautious. Investors are closely monitoring the dual influences of the US-Iran negotiation stalemate and the Federal Reserve's interest rate trajectory. Amid the intense tug-of-war between geopolitical risks and high-interest-rate expectations, bulls and bears are evenly matched, leading to a short-term directional stalemate for gold prices as they await a clear signal for a breakout.
The gold market is currently caught in a difficult tug-of-war between conflicting forces. Sudden shifts in geopolitical tensions and strong macroeconomic monetary policy pressures are colliding, making it challenging for gold prices to find a clear direction in the near term.
Recent statements from the US President regarding US-Iran negotiations have been contradictory. On one hand, he claimed that negotiations have entered the "final stage," briefly boosting market risk appetite. On the other hand, he issued a stern warning that the US would resume military action within days if Iran does not accept the terms.
This contradictory rhetoric has instantly heightened market sensitivity to risk aversion. Currently, global attention is firmly fixed on the Strait of Hormuz—a critical artery carrying approximately 20% of the world's seaborne crude oil. Any disruption to this shipping lane, potentially causing oil prices to surge, would inevitably intensify global inflationary pressures. As the ultimate hedge against geopolitical turmoil and rising prices, gold's underlying buying support remains robust.
However, risk aversion alone is insufficient. The recently released minutes from the Federal Reserve's April FOMC meeting acted like a cold shower, dampening bullish sentiment. The minutes indicated that, in the face of unresolved Middle East conflicts and potential energy price increases, most officials remain highly vigilant about inflation rebounding. They explicitly stated that if price pressures persist above the 2% target, further policy tightening in the future cannot be ruled out.
Although interest rates remained unchanged at 3.5%-3.75% in April, expectations for "higher for longer" have been firmly established. Consequently, US Treasury yields have stabilized at elevated levels, and the US dollar index remains strong. This has diminished the appeal of non-yielding gold compared to interest-bearing assets, creating significant selling pressure at higher levels.
Market focus has now shifted to the preliminary US May Markit Purchasing Managers' Index (PMI) data scheduled for release on Thursday evening. If the data shows continued resilience in US economic activity, markets may further reduce bets on Federal Reserve rate cuts, potentially driving the US dollar stronger and suppressing gold's short-term performance. Conversely, if the PMI data shows a noticeable slowdown, it could reignite market expectations for rate cuts, potentially pushing gold to test higher levels again.
From a technical perspective, gold's daily chart structure still maintains a clear bullish trend. Recent consecutive closes above the key $4500 level indicate that medium- to long-term buying power remains strong. The immediate resistance is currently near $4580. A sustained break above this area could lead the market to test the $4600 level. Key support levels are located around $4480 and $4450. As long as prices hold above this range, the medium- to long-term uptrend remains intact.
On the 4-hour chart, gold has recently entered a phase of consolidation at elevated levels. Short-term moving averages are beginning to flatten, and the MACD indicator's momentum has slowed, suggesting a moderation in the short-term bullish momentum pace. However, the RSI indicator remains above 50, indicating that the overall market bias is still tilted towards strength.
If Middle East tensions escalate further, gold could potentially resume its breakout momentum. Conversely, if US economic data proves robust and markets continue to price in the Federal Reserve maintaining high interest rates, gold prices may face pressure for a technical correction in the near term.
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