Gold Vulnerable, High Risk
Gold is currently moving "constrained" as the market is juggling two major forces: inflation concerns stemming from rising oil prices versus the need to hedge against lingering geopolitical risks. As a result, prices fell briefly but quickly pared losses and returned to the US$4,535/ounce area.
Fundamentally, the key is Hormuz. As long as this energy supply remains unclear, a risk premium is likely to be placed on oil. Expensive oil reinforces the inflation narrative and typically fuels expectations of tighter interest rates, which weighs on gold as it offers no unbalanced yield.
The pressure on gold intensifies when bond markets are volatile and yields rise. When yields rise, the "opportunity cost" of holding gold rises, so speculative interest in gold tends to diminish and some positions can be unwound, as reflected in gold's weakness since the conflict began.
However, gold has not completely lost its support. High geopolitical risks and volatile headlines keep gold relevant as a hedge, often cushioning declines when infections rise, especially if markets become concerned about growth as the conflict drags on.
Technically, the short-term structure remains fragile, as gold has fallen sharply since the start of the conflict and continued its decline last week. The intraday drop to around US$4,480 and then rebound suggests the underlying area is starting to attract buying interest, but the rebound hasn't been strong enough to alter the broader trend.
The area of concern for the market right now is practically the support area around US$4,480 (the most recent low), with a further area at the psychological level of US$4,400 if pressure persists. Meanwhile, resistance near US$4,535–4,550 serves as a test zone; if prices repeatedly fail to break through this area, the market typically interprets the rebound as a pullback within a still-weakening trend.
In the coming days, the primary focus remains on the combination of oil's direction, yield and dollar movements, and the Fed's signal from the meeting minutes. If oil and crop yields continue to rise simultaneously, gold risks struggling to strengthen; conversely, if geopolitical volatility increases or markets begin to price in a slowdown, gold could regain support even if the dollar remains strong. (asd)*
Source: Newsmaker.id
