During the Asian trading session on Tuesday, the spot price of gold stood at $4,318.50 per ounce, marking an intraday increase of 0.15%. The price reached a high of $4,376.11 and a low of $4,305.89, continuing the robust gains from Monday and accumulating a three-day rise exceeding 2.4%. On the Shanghai Gold Exchange, the benchmark price for Au99.99 was 945.00 yuan per gram, while gold T+D traded at 942.64 yuan per gram, up about 1.19% for the session. Domestic prices closely tracked international gold, reflecting steady investment demand.
Key Market Analysis
David Wu, a former senior macro analyst at Bank of America, presents a view counter to the prevailing market narrative of "falling oil prices leading to lower inflation and a rally in risk assets." He argues that the market's positive interpretation of the temporary US-Iran agreement on Hormuz Strait navigation is superficial, focusing only on immediate price action rather than the broader implications. Wu contends this agreement represents the most significant strategic concession by the United States since the Vietnam War—a compromise of "terms for a ceasefire" rather than a declaration of victory.
While falling oil prices and a rebounding US stock market paint a positive picture, Wu highlights a secondary effect. He suggests that as the US makes structural concessions on nuclear terms and sanctions relief to reopen the strait, global capital will reassess "US execution capability and credibility." This reassessment won't be reflected in today's oil prices but in an acceleration of de-dollarization in long-term reserve allocations.
Wu offers a unique interpretation of gold's recent pullback from highs. He believes that decline was not due to deteriorating fundamentals but rather a forced liquidation by Gulf oil producers. During the conflict period, with oil exports disrupted and cash flow strained, these nations opted to "sell gold for liquidity." Selling US Treasuries would have triggered more regulatory scrutiny and political friction, making gold the most usable, highly liquid buffer. From this perspective, the selling pressure was passive and one-off, not indicative of a reversal in investment demand trends.
Supporting this view is data showing global central bank gold purchases have consistently exceeded historical averages for several years, with volumes cited in the 800+ tonne range. The weight of gold in international reserve structures continues to rise. Wu's conclusion is that the $4,000 per ounce level is not an endpoint but a window for long-term capital re-entry.
Wu's most assertive inference concerns the US dollar. He posits that the current dollar strength is not fundamentally driven by residual effects of interest rate hikes but by structural dollar demand from the global scramble for US AI assets (chips, models, computing infrastructure). Should this AI expansion face obstacles—due to a combination of export controls, competitive pressure from cost-effective alternatives, and a slowdown in capital expenditure—this "atypical support" could weaken. Without this additional buying pressure, the dollar could lose ground, potentially benefiting gold. Furthermore, falling oil prices erode the inflation-driven component of real yields, while the deteriorating US fiscal situation, with $39 trillion in federal debt and annual interest payments exceeding $1 trillion, continues to enhance gold's appeal as a hedge against credit risk.
Current Technical Perspective
Gold advanced steadily throughout the previous session without major volatility, exhibiting a slow but consistent upward trend. However, such a pace is unlikely to be sustained, and a significant retracement began late in the session. Short-term pullbacks are normal and do not alter the immediate bullish structure. The key event remains the Federal Reserve's interest rate decision early Thursday. Trading is likely to remain range-bound ahead of this data. Patience is advised to wait for a dip to re-enter long positions.
On the 1-hour chart, gold's moving averages have formed a bullish crossover and alignment. The current short-term decline appears to be a normal correction within this 1-hour timeframe, serving as consolidation within the broader uptrend. The strategy for the day is to watch for a pullback and focus on long positions around the $4,260 support area.
As long as gold holds above the $4,230 level on a retreat to the $4,260 support zone, it presents an opportunity to buy on dips. The short-term 1-hour trend remains strongly upward, and this momentum may persist. No market moves in one direction indefinitely; short-term corrections are normal. Patiently awaiting a consolidation phase will likely set the stage for the next leg higher in the gold rally.
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