The gold market has failed to maintain safe-haven buying even as the war in the Middle East increases geopolitical and global economic instability. Although the precious metal still maintains a healthy upward trend, analysts warn investors to closely monitor the 5,000 USD/ounce support level next week.
The gold market started the week with optimism as investors reacted to the joint missile attacks of the US and Israel against Iran, thereby igniting a new conflict in the Middle East. However, gold's upward momentum did not last as precious metal prices are heading towards ending the week in a downward state, ending a four-week consecutive rally.
The nearest spot gold price was traded at $5,172.60/ounce, down about 2.5% compared to last Friday.
Although gold is under selling pressure again, analysts believe that the picture for the precious metal is still unclear, because the disappointing US jobs data released on Friday has partly supported prices before the weekend holiday.
According to the US Bureau of Labor Statistics, the number of non-farm jobs in the US in February decreased by 92,000 jobs. This figure is significantly lower than economists' forecasts, when analysts previously expected the economy to create about 58,000 jobs.
At the same time, the unemployment rate increased to 4.4%, higher than January's 4.3%, while economists predicted this rate would remain unchanged.
Analysts believe that the gold market is struggling due to many factors. Weak economic data may prompt the US Federal Reserve (Fed) to ease monetary policy more strongly in the second half of the year. However, on the contrary, geopolitical instability is pushing oil prices and inflation up, which may force the central bank to maintain cautious monetary policy longer than expected.
Mr. Neil Welsh, Director of Metals at Britannia Global Markets, said that various pulling forces are affecting the gold market. According to him, safe-haven cash flow due to the Middle East conflict, strong USD, inflation concerns and constantly changing interest rate cut prospects have mainly caused gold prices to fluctuate in the range. In this context, liquidity tensions and portfolio restructuring, including sell-offs to meet margin requirements, often become decisive factors and overwhelm short-term safe-haven price increases.
Mr. Michael Brown, senior research strategist at Pepperstone, said that the sell-off and strong fluctuations of gold this week show that the market still needs time to absorb the accumulated speculation after the hot increase in January.
He said that gold is not currently actually trading as a safe-haven asset but like a risky asset affected by market momentum. In the past week, gold has even had a near-perfect reversal correlation with crude oil prices, which shows that there are still many speculative factors in the market and that is preventing gold from playing a safe-haven role as expected.
However, Mr. Brown believes that the 5,000 USD/ounce threshold is still a very strong support zone, the price that the market tested earlier this week and may play a role as a bottom in the short term, unless the Middle East conflict clearly ends. If the war ends, the market's risk appetite will increase, putting pressure on gold. Unless that happens, the market may continue to fluctuate in a certain price range.
In the context of great instability in the Middle East, analysts recommend that traders should closely monitor the diễn biến of oil prices because this factor is directly affecting the USD and the precious metals market.
Oil prices rose sharply as military actions against Iran affected production in the Middle East and disrupted the global energy supply chain. West Texas Intermediate (WTI) crude oil for April delivery is heading towards ending the week around 90 USD/barrel, the highest level since October 2023.
Mr. Antonio Di Giacomo, senior market analyst at XS. com, said that the recent developments of gold reflect a fragile balance between the traditional shelter role of the precious metal and the strength of the USD during the global tense period. As the Middle East crisis continues to cause volatility in the energy and financial markets, investors will focus on US macroeconomic data and Fed decisions, factors that are likely to shape gold's trend in the coming weeks.
Although gold is having difficulty regaining momentum, some analysts still believe that price drops will attract buying power back. Mr. Naeem Aslam believes that gold may continue to be under pressure because the market has not yet experienced panic, as no one knows how long the war between the Middle East and Iran will last.
According to him, investors are looking at the diễn biến of oil prices and realize that despite increasing tensions, the energy market has not yet signaled a major shock. In the US, attention is still focused on the overall economic picture, which has not shown serious warning signs that could cause a wave of panic in the market.
Mr. Aslam believes that the most important factor at this time is the duration of the war. If the conflict lasts longer than a month or so, interest in gold may flare up again. In his opinion, it is not yet time to sell gold and investors should consider buying when prices adjust.
Regarding technical thresholds, Mr. Lukman Otunuga, senior market analyst at FXTM, said that the 5,000 USD/ounce mark is an important psychological threshold to monitor next week.
He said that if gold prices close the week below the 5,000 USD/ounce mark, this could signal a deeper decline. However, buyers can still counter-attack if this price level continues to play the role of a solid support zone. Notable technical levels include 5,200 USD, 5,050 USD, 5,000 USD and 4,900 USD per ounce.
As the market is paying special attention to energy prices, some analysts believe that gold prices may react strongly to inflation data released next week. The market will follow the consumer price index (CPI) and personal consumption expenditure index (PCE) reports, the Fed's preferred inflation measure.
In addition, investors will also wait for a second estimate of US Q4 GDP after the initial disappointing figure showed the economy grew by only 1.4%.
