A "storm" is forming in the gold market as technical and fundamental factors simultaneously reverse direction, overwhelming the safe haven role of precious metals in the context of the US-Israel conflict with Iran continuing to escalate and disrupt the global supply chain.
Last week, Mr. Ole Hansen, Head of Commodity Strategy at Saxo Bank, specifically monitored the 50-day moving average around the threshold below 5,000 USD/ounce, which is considered an important "boundary" of the market. This support threshold was broken right at the beginning of the European session on Wednesday, pulling gold prices to a 6-week low.
The nearest spot gold price was at 4,854.97 USD/ounce, down more than 2% during the day.
According to Mr. Hansen, this sell-off disappointed many investors as gold could not maintain its safe haven role, despite increasingly serious geopolitical instability in the Middle East.
Not only facing technical pressure, gold also faces many fundamental resistance forces in the short term. The impact of war on the energy market has increased inflation expectations, while central banks have been cautious about loosening monetary policy.
The sharp increase in oil and refined products prices, especially diesel oil, has reduced the possibility of short-term interest rate cuts, even causing the market to switch to a scenario of interest rates remaining at a high level for a longer time. This increases real yields, becoming a disadvantageous factor for gold, a non-performing asset.
At the same time, geopolitical risks also drive cash flow into USD-denominated assets, creating direct competition with gold in its safe-haven role.
This development occurs as the US Federal Reserve (Fed) is closing its latest policy meeting. The market is almost certain that the Fed will keep interest rates unchanged, but greater concern is that the central bank may signal maintaining a neutral stance for longer than expected. Data from CME FedWatch shows that the pre-summer interest rate cut expectation has almost been eliminated.
Mr. Hansen said that the current inflation shock mainly comes from supply, causing central banks to have few tools to respond effectively. The combination of "stubborn" inflation and limited policy room creates an uncertain environment for gold in the short term.
From a technical perspective, breaking important thresholds has triggered a wave of selling according to momentum. Gold has been one of the strong and crowded profit-generating investment channels in recent years, thanks to buying power from central banks, risk hedging needs and concerns about currency devaluation. When the trend reverses, investors tend to take profits to increase liquidity, making selling pressure even greater.
Not only gold, silver is also under strong downward pressure. Spot silver prices fell to 77.13 USD/ounce, losing 2.5% and falling to a 4-week low.
According to Mr. Hansen, silver is more sensitive to growth prospects due to its role in industrial production. When energy prices rise, raising concerns about global economic recession, along with strong fluctuations and high leverage use, this metal is more likely to be sold off in correction phases.
Regarding gold price prospects, Mr. Hansen said that the nearest support level is around 4,840 USD/ounce. If it continues to weaken, the price may fall deeper to the 4,660 USD/ounce zone in the near future.
