Although gold prices continue to find initial support around 4,700 USD/ounce, the market is still in a sideways state, unable to exceed the 4,800 USD/ounce mark, as geopolitical instability continues to prioritize the USD as a safe haven asset.
Besides the prolonged instability related to the ceasefire and peace talks in the Middle East, some analysts believe that the gold market may retest the bottom of a wider fluctuation range next week. The reason is that rising oil prices increase concerns about inflation, which may force the US Federal Reserve (Fed) to maintain its current monetary policy in the near future.
Mr. Lukman Otunuga - senior market analyst at FXTM, commented: "While worried about rising inflation shocks, central banks are likely to keep interest rates unchanged, and may even raise interest rates in the near future. This'hawkish' stance is bad news for gold - an unprofitable asset - even though risk avoidance sentiment still exists.
He added: "The chaos and uncertainty surrounding the ongoing Iranian conflict has erased expectations that the Fed will cut interest rates in 2026. Therefore, interest rates are forecast to remain unchanged in April, while Fed Chairman Jerome Powell is becoming the focus of attention.
Technically, gold prices have fallen below the 100-day moving average (SMA). If closing the week below this level, the price could fall to 4,600 USD and 4,450 USD/ounce. If it can hold above 4,700 USD, buyers may head towards the 50-day SMA at 4,870 USD and 4,900 USD/ounce.
Before the Fed meeting next week, market forecasts for monetary policy of this agency fluctuated sharply due to economic and geopolitical instability. Last month, the market once saw a small possibility that the Fed might raise interest rates at the end of the year.
However, this unlikely scenario has now been removed from market valuation. Investors are now shifting to debate whether the Fed will cut interest rates or not. Last week, the market assessed the possibility of interest rate cuts by the end of the year at 50/50, but this ratio has now fallen below 40%.
Increasing the fragility of the monetary policy environment, the US Senate Banking Committee has begun the process of approving Mr. Kevin Warsh to become the new Fed Chairman. However, it is likely that he will not be approved before mid-May, when Mr. Jerome Powell's term ends.
Mr. Ole Hansen - Head of Commodity Strategy at Saxo Bank, said that although gold is still stuck in the 200 USD range, from 4,650 - 4,850 USD/ounce, the market is still in a favorable position to take advantage of positive long-term fundamentals.
He said: "Fed Chairman Jerome Powell is unlikely to change his views significantly, as long as the US economy continues to show resilience, despite modest growth. However, more worrying is the US public financial trajectory, as fiscal pressure increases - due to high repayment of tariff-related and military spending-related debts - continuing to weigh the already huge debt burden.
In the near future, the gold support base remains intact. As geopolitical tensions related to Iran cool down, investors' attention is likely to return to the structural factors that boosted the recent gold price increase.
In addition to the Fed, Bank of Japan, Bank of Canada, Bank of England and European Central Bank will also hold monetary policy meetings this week. The market expects these agencies to maintain their view of waiting and observing due to the prolonged chaotic situation in the Middle East.
Economists also said that the market will specifically monitor inflation data, when the US government releases the first figures on Q1 GDP and the Personal Consumption Expenditures (PCE) report.
According to experts, inflation data will reflect March and is expected to show the impact of the war with Iran on consumer prices.
Along with rising inflation, some analysts warn that the technical outlook for gold is starting to weaken, as the price cannot maintain above the 4,800 USD/ounce mark.
Although this precious metal still maintained initial support at 4,700 USD, the 4-week winning streak has ended. The nearest spot gold price was at 4,716.10 USD/ounce, down more than 2% compared to last Friday.
