Gold prices are forecast to close the week with another increase before the long holiday, but analysts believe that the market is still finding a balance in the context of high volatility due to prolonged tensions in the Middle East.
Gold prices are on an upward trend of about 3% in the week, maintaining above the threshold of 4,600 USD/ounce. However, this precious metal encountered resistance in Wednesday and Thursday sessions when it could not overcome the resistance zone of 4,800 USD/ounce.
Spot gold prices in this morning's trading session updated at 09:19 Vietnam time fell 2,28% to 4,676.43 USD/ounce.
Analysts believe that price movements show that gold is still trapped in a tug-of-war due to conflict between the US and Israel with Iran. For most of the week, gold and silver recorded upward momentum again as investors expect the war to be resolved soon.
Although US President Donald Trump tried to strengthen that belief in his Wednesday evening speech, the market is now beginning to reflect a longer-term conflict scenario, as oil prices return to above $100/barrel before the Easter holiday.
Expectations for disruptions to the global supply chain are also supporting the strength of the USD.
Mr. Alex Kuptsikevich – Head of Market Analysis at FxPro said that Mr. Trump's statement "bringing Iran back to the Stone Age" contradicts his previous statement about ending the conflict within 2-3 weeks through successful negotiations. He said that those involved in the Polymarket forecasting platform estimate the possibility of the US-Iran war ending before the end of June is about 65%. The closure of the Strait of Hormuz before that time would be a real disaster for the global economy.
Mr. Kuptsikevich said that this uncertainty will continue to put pressure on gold prices.
He believes that the Middle East conflict is putting pressure on gold due to expectations that central banks will raise interest rates to control inflation due to rising oil prices. However, this is a rather short-term approach, because high fuel prices are first of all a shock to consumers, then will spread to the economy, thereby requiring monetary policy to be loosened rather than tightening. However, central banks are still focusing on controlling inflation.
In the medium term, he said that the level of 4,200 USD/ounce is an important target threshold. If gold prices fall to this level, the upward trend has not been broken. However, if this level is broken, the three-year upward trend may reverse. Conversely, if prices rebound from this zone, the upward outlook for gold prices is still maintained.
Mr. Nick Cawley – An analyst at Solomon Global said he sees gold prices in a solid recovery phase after falling below 4,100 USD/ounce in a strong sell-off last month.
He emphasized that the key factor for gold is still the conflict in Iran.
He believes that inflation is still a concern in the short and medium term and cannot be ignored. Central banks may begin to tighten monetary policy in the coming weeks, but if the market believes that this is only a short-term factor and interest rates will fall back at the end of the year, then traditionally disadvantageous factors for gold will not be too strong. He also believes that the 5,000 USD/ounce mark is more psychologically meaningful than a technical resistance level, and if it surpasses this mark, gold prices may head towards a historical peak set at the end of January.
Mr. Lukman Otunuga – Senior Analyst at FXTM, said he is monitoring the initial support zone around 4,600 USD/ounce, in the context that gold is still very sensitive to inflation concerns and the possibility of interest rate hikes in an energy price escalating environment.
He believes that if the closing price is below 4,600 USD/ounce, gold may fall to the 4,450 USD zone. Conversely, if this level is maintained, the price may recover back to the 4,800 USD zone.
He also believes that the safe haven attraction of gold could become a dominant factor if the prolonged closure of the Strait of Hormuz causes a growth shock to the global economy.
He said the Federal Reserve is in a difficult position when it has to balance inflationary pressure due to conflict and signs of weakening of the labor market.
Mr. Otunuga said that when the market is off for the Holy Friday holiday, the US non-farm payroll report for March will still be released and will orient the market next week, as the US government does not consider Easter as an official holiday.
In addition to the jobs report, the market will also receive important data on the service and manufacturing sectors.
The minutes of the Federal Reserve's March monetary policy meeting will also attract attention, but the focus will be on the Personal Consumption Expenditures (PCE), the Fed's preferred inflation measure. The trading week will end with the announcement of additional inflation data, including the US consumer price index (CPI).
Notable economic data in the coming week includes:
ISM Service PMI
US durable goods orders
Fed monetary policy meeting minutes
US Q4 GDP final, PCE index
US CPI, Preliminary consumer confidence index of the University of Michigan
