As the conflict with Iran enters its third week, gold prices still maintain a support zone around the 5,000 USD/ounce mark. However, investors are still looking for clearer signals about the timing and scope of the war. According to Daniel Pavilonis, senior commodity broker at RJO Futures, if the market believes that the conflict will be longer and more serious than the US administration's estimate of about six weeks, it could lead to a new sharp decline for both the stock market and precious metals.
Talking to Kitco News, Mr. Pavilonis said that gold and silver in the near future are likely to continue to follow the trend of the stock market. Meanwhile, stocks are fluctuating in the opposite direction to US Treasury bond yields. He predicts that the stock market may soon enter a new wave of decline.
According to him, the diễn biến of precious metals is currently closely linked to the energy market and especially the yield curve, especially the yield of 10-year US bonds. As yields continue to increase, downward pressure on gold and silver will also increase.
Mr. Pavilonis believes that the coming days will be decisive for the financial market, because they can show more clearly the scale and extent of the conflict's spread.
He believes the US may increase its military presence in the Middle East, even deploying forces on land. However, some Indian oil tankers have begun moving through the Strait of Hormuz, and there may be more ships, including Chinese ships. If this happens, most of the oil that has passed through this shipping route may be restored, thereby helping to cool down tensions in the market.
According to him, if interest rates continue to rise due to rising oil and energy prices, precious metals may face selling pressure. Conversely, if yields fall, gold and silver may rise along with the stock market. However, when oil prices return to a strong upward trend, asset markets may simultaneously fall.
Mr. Pavilonis also believes that Iran's attacks on neighboring countries may be part of a double strategy. On the one hand, Tehran is putting pressure on the oil exports of these countries. On the other hand, Iran may force them to sell off some US Treasury bonds and USD-denominated assets.
According to him, many oil producing countries in the Middle East often invest oil revenue in US Treasury bonds, stocks and gold. When liquidity is needed to ensure security, they can quickly sell financial assets such as bonds or stocks.
This broker also believes that the current conflict is revealing weaknesses in relations between the US and the Gulf countries.
He emphasized that the core issue is security. If the US cannot ensure security for its allies, while they are facing attacks by cheap drones, the role of assets and security commitments from the US may be questioned.
In the current context, Mr. Pavilonis predicts that both the stock market and precious metals may continue to weaken. According to him, gold and silver tend to fluctuate in the same direction as stocks, especially silver. The stock market is showing signs of weakening and may enter a new downward phase similar to the period in April last year.
He believes that if this scenario occurs, oil prices are likely to set a new peak or at least return to previous highs.
He warned that the market may still have many fluctuations before stabilizing again. In a negative scenario, gold prices may even fall to the 4,200 USD/ounce range.
