Gold prices have rebounded! Is this rally sustainable?
Key Points at a Glance
Short-Term Outlook
We hold a cautiously optimistic view on the rebound. At current levels, the strategy is to hold existing positions and wait for further gains, while looking for opportunities to sell at higher prices. Chasing the rally is not recommended. Key resistance to watch is the previous dense trading zone around 4500-4600.
Medium-Term Outlook
If subsequent geopolitical tensions resurface and trigger a pullback, considering the US's continued willingness to de-escalate, a renewed test of lows may present a fresh buying opportunity.
Today (June 15th), domestic precious metals futures opened higher and continued to gain ground. Shanghai gold futures surged over 4% during the session, marking the largest single-day gain in nearly four months.
The Core Conflict for Gold
Since the onset of the geopolitical conflict, gold prices have been caught in a tug-of-war between the long-term prospect of a global order reshuffle and the immediate reality of liquidity tightening. This liquidity squeeze not only reflects the mid-term price pressures from sustained blockades in key straits and supply chain disruptions, leading to a shift in Federal Reserve policy from easing to tightening, but also stems from the necessity for energy-importing and Middle Eastern nations to exchange gold for liquidity to stabilize their currencies and financial markets.
Collectively, although the influencing factors are at a lower hierarchical level, the combined negative impact of these short-to-medium-term headwinds has outweighed the support from higher-level, long-term positive factors, directly contributing to the persistent weakness in gold prices seen previously.
Have the Headwinds Disappeared?
The latest news over the weekend indicates that both the US and Iran have announced the signing of a ceasefire memorandum of understanding. Former President Trump authorized the lifting of the naval blockade on the Strait of Hormuz, with 60-day nuclear negotiations set to commence following US compliance.
Driven by this news, today (June 15th) saw the US dollar and crude oil prices fall, while US Treasury bonds and precious metals rose, showing clear signs of improving liquidity.
In the short term, the agreement reached before the June FOMC meeting undoubtedly provides a basis for new Fed Chair Warsh to present a "dovish" stance. Coupled with market consensus that the policy statement will maintain current rates and remove language hinting at further easing, the meeting is expected to have a neutral-to-positive impact on precious metals.
However, it is important to note that Israel was not a participant in this memorandum and has stated it will not be a party to the agreement. If Israel subsequently provokes further incidents, the US's influence over it and Iran's response will once again test the market.
Based on this, we maintain a cautiously optimistic view on the short-term rebound driven by returning liquidity. The current strategy is primarily to hold positions for potential gains and look for opportunities to sell high, not to chase the rally. Focus should be on the key resistance in the previous dense trading zone of 4500-4600. If the situation deteriorates again and triggers a pullback, considering the US's continued willingness to de-escalate, a renewed test of lows may offer a new buying opportunity.
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