The gold market continues to face strong pressure as expectations of the possibility of cooling down the Iranian conflict weaken once again, in the context of no clear progress related to ending the war and reopening the Strait of Hormuz.
This development continues to push oil prices up and increase concerns about global inflation.
Mr. Lukman Otunuga - Senior Analyst at FXTM - said that the optimistic sentiment in the gold market at the beginning of the week has quickly reversed as expectations of interest rates returning to increase sharply before the end of the week.
After a positive first period of the week with gold prices testing the resistance zone of 4,750 USD/ounce, the market is currently turning down sharply. The nearest spot gold price traded around 4,556.80 USD/ounce, down more than 2% during the day and losing over 3% throughout the week.
Meanwhile, the silver market also recorded stronger fluctuations.
At the beginning of the week, many investors expected silver to reach the 90 USD/ounce mark, but the price has plummeted sharply in the last two sessions. Spot silver price is currently around 77.05 USD/ounce, down 7.5% in the day and losing about 4% in the week. Compared to the peak set on Wednesday, silver has now fallen by more than 13%.
Previously, silver attracted strong cash flow due to concerns that the Iranian conflict would disrupt global supply of basic metals. According to analysts, the decline in copper and many other industrial metals also means that silver supply will decrease as well because silver is often mined as a byproduct.
Tightening supply and stable industrial demand continue to cause the silver market to maintain a sixth consecutive year of shortage.
Although the long-term outlook for gold and silver is still positively assessed, many experts believe that the market is currently facing significant short-term pressure.
According to Mr. Otunuga, the biggest pressure factor currently is the increased opportunity cost of holding precious metals as high inflation makes the market begin to consider the possibility of the Fed continuing to raise interest rates.
Oil prices return to the three-digit zone, causing concerns about inflation to continue to spread. In the context that the market currently assesses about 65% of the Fed's ability to raise interest rates before the end of 2026, the short-term trend of gold is still under downward pressure, especially as the USD continues to strengthen," he said.
According to him, the next important support zone for gold is around 4,500 USD/ounce. If this zone is broken, the price may continue to fall to 4,450 USD or 4,400 USD/ounce. In case of recovery above 4,600 USD/ounce, the market will focus its attention on the 50-day moving average.
While many experts still see the adjustments as long-term buying opportunities, some opinions suggest that the market currently still has a risk of strong fluctuations in the short term.
Mr. Fawad Razaqzada - Analyst at FOREX. com - said that he is not in a hurry to buy as downward pressure has just begun to form.
The market may still fluctuate strongly in the next few days," he assessed.
According to analysts, as long as oil prices remain high due to Middle East tensions, US bond yields are likely to remain high and continue to put pressure on gold.
In the current context, many experts believe that even new Fed Chairman Kevin Warsh will have difficulty changing the direction of monetary policy.
Mr. Warsh has just been approved by the US Senate to replace Mr. Jerome Powell this week. Although he has expressed his support for lower interest rates, analysts believe that he is unlikely to push the Fed to cut interest rates in the context of continued inflation.
Data released this week shows that inflation in the US is spreading more widely in the economy.
The US Department of Labor said that the consumer price index (CPI) increased by 3.8% in the past 12 months, while core inflation increased to 2.8%, higher than market expectations and further away from the Fed's 2% target.
Following that, the producer price index (PPI) in April also increased sharply with wholesale inflation increasing by 6% compared to the same period last year - the highest level since the end of 2022.
According to economists, inflationary pressure no longer only comes from energy prices but is beginning to spread to many other sectors, increasing concerns about the risk of "stagflation" - slow growth accompanied by high inflation.
Mr. Naeem Aslam - Investment Director at Zaye Capital Markets - said that although raising interest rates cannot solve the supply problems that are causing inflation, the Fed may still have to act to control market expectations.
The possibility of interest rate hikes is now higher than before, although this is not my main scenario," he said.
However, Mr. Aslam still believes that gold continues to be a asset with positive long-term prospects thanks to buying power from central banks, geopolitical factors and the trend of diversifying reserves outside the USD.
In the coming week, when not many important economic data is released, analysts believe that gold prices are likely to continue to be mainly affected by oil price movements, US bond yields and geopolitical situation in the Middle East.
