Gold Held Back, Middle East De-Escalation Pressures Prices
Gold prices (XAU/USD) showed limited gains on Tuesday (March 31), driven by hopes of a de-escalation in the Middle East conflict. However, gold prices remained stuck within a one-week trading range, reflecting heightened uncertainty among traders due to mixed signals regarding geopolitical developments. A stronger US dollar (USD) also posed a drag on gold prices, which traded around $4,483 after briefly rising above $4,600. The US dollar traded slightly lower at 100.33, despite earlier reaching a ten-month high of 100.64.
Middle East tensions remain a factor weighing on the market, with a Wall Street Journal report revealing that President Trump is willing to end US military operations against Iran even if the Strait of Hormuz remains largely closed. This raised hopes that the conflict could end soon. However, Trump emphasized that the US's primary goal is to reduce Iran's naval and missile capabilities and continued diplomatic pressure to restore trade flows, keeping tensions high. Meanwhile, Iran has proposed tariffs on shipping through the Strait of Hormuz, further complicating the situation.
Persistently high oil prices and rising inflation have prevented gold from acting as a typical safe-haven asset or inflation hedge. Instead, gold's price action is driven by expectations of higher interest rates for longer globally, as well as continued demand for the USD. Gold prices are now on track for their worst monthly decline since October 2008. The CME FedWatch Tool shows that the market expects the Fed to keep interest rates unchanged until 2026. In the short term, gold is likely to remain within a range with a slight downward bias unless there is a clear end to the US-Iran conflict.
Cause: Geopolitical tensions in the Middle East, particularly those involving the US, Iran, and Israel, as well as uncertainty regarding the Fed's monetary policy, have a direct impact on gold price movements.
Effect: These tensions prevent gold from fully functioning as a safe-haven, with gold prices pressured by rising interest rates and a strengthening US dollar. (alg)
Source: Newsmaker.id
