Gold prices stage a dramatic rebound? Don't rush to buy at the highs! Two major threats lurk behind the geopolitical storm.
2026-05-05 14:02:30
During Tuesday's Asian trading session, spot gold prices (denoted by XAU/USD) saw some buying support, partially recovering from the previous day's decline to the $4,500 per ounce level, marking its lowest point in over a month. It is currently trading around $4,545.45 per ounce, up approximately 0.5%. However, it should be noted that this rebound lacks a clear and compelling fundamental catalyst. Therefore, this upward momentum risks fading quickly, and investors should exercise extreme caution before establishing any substantial long positions. Overall, gold's upside potential appears to remain significantly constrained by multiple factors.
The fragile ceasefire agreement between the US and Iran is currently facing a severe test. Following Monday's serious violence in the Persian Gulf, which significantly escalated the situation, the agreement is on the verge of collapse. Specifically, the United Arab Emirates and South Korea have both reported attacks on ships in key international shipping lanes. The UAE further stated that a fire broke out in the Fujairah oil port area after Iranian missile and drone attacks. In response, US President Donald Trump publicly warned that if Iran attacks escort ships deployed by the US under its new "Freedom Initiative," Iran will face the severe consequence of being "wiped off the face of the earth."
These latest developments have significantly increased the likelihood of further escalation of tensions in the Middle East, triggering a new round of price increases for crude oil on Monday. This phenomenon further confirms the widespread market expectation that war-driven energy price spikes will reignite inflationary pressures and prompt major central banks around the world, including the Federal Reserve, to adopt a more hawkish monetary policy stance. According to data from the CME Group's FedWatch Tool, the market now expects a 35% probability of a Fed rate hike before the end of the year, compared to less than 10% just last Friday.
The aforementioned macroeconomic outlook continues to provide upward momentum for US Treasury yields and further supports the strength of the US dollar. In addition, the direct standoff between the US and Iran in the Strait of Hormuz is another factor contributing to the consolidation of the dollar's reserve currency status. This series of dynamics collectively confirms the negative outlook for gold in the short term, meaning that any subsequent attempts at price increases are more likely to encounter new selling pressure. Therefore, before confirming that gold prices have truly bottomed out and establishing further upside positions, it is prudent to wait for stronger and more sustained follow-through buying signals.
From a technical analysis perspective, gold prices remain bearish in the short term, primarily due to their price consistently trading below the 200-period simple moving average on the four-hour chart (currently at $4655.02 per ounce). Furthermore, the precious metal is currently facing resistance from the 38.2% Fibonacci retracement level of the March-April rally. Although gold prices have rebounded slightly from the 50% retracement level (around $4500), their overall movement remains constrained by a dense resistance zone.
Meanwhile, indicators measuring market momentum remain weak. The Relative Strength Index (RSI) is currently hovering around 39.84, below the 50 neutral level, while the Moving Average Convergence Divergence (MAD) indicator is also in negative territory. These technical signals suggest that any attempt to rally is likely to fizzle out under supply pressure above the 38.2% Fibonacci retracement level (equivalent to $4595.23 per ounce). If prices continue to attempt to move higher, they may encounter resistance near the 200-period simple moving average ($4655.02), followed by resistance at the 23.6% retracement level ($4711.12).
On the downside risks, initial support is seen at the 50% retracement level of $4,501.57 per ounce, followed by the 61.8% retracement level at $4,407.90. If bearish pressure accelerates further, deeper support levels lie at $4,274.55 and then $4,104.68.
In conclusion, although gold prices have gained some upward momentum in the short term due to geopolitical tensions in the Middle East, multiple fundamental factors, including rising inflation expectations, a potential shift towards a more hawkish stance by major central banks, and a continued strengthening of the US dollar, limit the upside potential for gold. The bearish pattern presented by the technical charts also does not support blindly chasing the market higher. For market participants, maintaining a cautious wait-and-see approach and awaiting clearer technical and fundamental confirmation signals may be a more prudent strategy at this stage.
Question 1: Since tensions in the Middle East usually benefit gold, why does this article argue that the upside potential for gold prices remains limited?
A: Geopolitical tensions in the Middle East will indeed trigger safe-haven buying of gold in the short term, thus driving a price rebound. However, the focus of this tension—the US-Iran standoff—has also brought the side effects of soaring oil prices and rising inflation expectations. Rising inflation expectations will prompt the market to bet on more hawkish monetary policies from major central banks such as the Federal Reserve (including possible further interest rate hikes), and interest rate hikes will increase the opportunity cost of holding non-yielding assets (such as gold). In addition, the tensions have also solidified the dollar's reserve currency status, leading to a stronger dollar. Therefore, although safe-haven demand provides some support for gold prices, the dual pressure from a strong dollar and expectations of interest rate hikes is stronger, significantly limiting the upside potential of gold.
Question 2: Through which specific channels does the tension between the US and Iran affect gold prices?
A: The tensions between the US and Iran are primarily impacting the gold market through three channels. First, the safe-haven channel: escalating conflict triggers market panic, prompting funds to flow into traditional safe-haven assets like gold, pushing up gold prices in the short term. Second, the inflation channel: the Strait of Hormuz is a crucial global oil shipping route; tensions lead to higher oil prices, which in turn raises overall inflation expectations. These inflation expectations reinforce the logic of central bank interest rate hikes, which is bearish for non-interest-bearing gold. Third, the exchange rate channel: geopolitical risks often increase the safe-haven appeal of the US dollar, especially when the conflict involves a direct adversary of the US, further highlighting the dollar's reserve currency status. A strong dollar typically puts downward pressure on dollar-denominated gold prices. Of these three channels, the negative effects of the latter two currently outweigh the positive effects of the first.
Question 3: Why did market expectations for a Fed rate hike rise sharply from less than 10% to about 35% in a short period of time?
A: The core driver of this shift in expectations is the surge in energy prices due to tensions in the Middle East. The significant rise in crude oil prices will directly impact downstream production and consumption, pushing up overall price levels. Market participants judge that the supply-side shock triggered by geopolitical conflict will reignite previously eased inflationary pressures. To curb the rebound in inflation, the Federal Reserve may be forced to abandon its previous wait-and-see approach and reconsider further interest rate hikes. Furthermore, a strong job market and the resilience shown by the US economy also provide conditions for a rate hike. Therefore, as the Persian Gulf situation unfolds, the probability of a rate hike before the end of the year, as reflected in the CME FedWatch tool, has jumped sharply in just a few days, from less than 10% to approximately 35%.
Question 4: From a technical perspective, what are the key resistance and support levels currently facing gold?
A: According to technical analysis, gold currently faces multiple resistance levels from top to bottom: the first resistance is at the 38.2% Fibonacci retracement level, around $4595.23 per ounce; the second, stronger resistance is at the 200-period simple moving average, around $4655.02; if the bulls can break through this level, the next target is the 23.6% retracement level, around $4711.12. On the downside, initial support is at the 50% retracement level, around $4501.57 per ounce; after breaking below this level, the next support is at the 61.8% retracement level, around $4407.90; if the bearish momentum intensifies further, deeper support areas are at $4274.55 and $4104.68 respectively. These technical levels provide important references for investors to determine buying and selling opportunities.
Question 5: Is there a contradiction between the strength of the US dollar and the safe-haven properties of gold? How should investors understand the relationship between the two?
A: There is no real contradiction between the two; rather, it's a dynamic game played out under specific circumstances. Gold and the US dollar are both important safe-haven assets, but market preferences shift depending on the situation. When global, non-US-led risk events occur (such as the European debt crisis), gold tends to perform better. However, when risk events directly involve the US's geopolitical rivals (such as the current US-Iran standoff), the dollar's safe-haven status is strengthened because investors tend to hold assets tied to US national power, military, and financial systems. Furthermore, the high interest rates resulting from the Federal Reserve's hawkish stance also enhance the dollar's attractiveness. Therefore, in the current environment, the dollar's strength has, to some extent, "stolen" some of the safe-haven funds that would otherwise flow to gold, thus weakening and offsetting gold's safe-haven function. Investors need to comprehensively assess the relative strength of gold and the dollar based on the nature of the risk events and the monetary policy context.
At 14:01 Beijing time, spot gold was trading at $4551.32 per ounce.
Geopolitical tensions: a new spark for inflationary pressures
The fragile ceasefire agreement between the US and Iran is currently facing a severe test. Following Monday's serious violence in the Persian Gulf, which significantly escalated the situation, the agreement is on the verge of collapse. Specifically, the United Arab Emirates and South Korea have both reported attacks on ships in key international shipping lanes. The UAE further stated that a fire broke out in the Fujairah oil port area after Iranian missile and drone attacks. In response, US President Donald Trump publicly warned that if Iran attacks escort ships deployed by the US under its new "Freedom Initiative," Iran will face the severe consequence of being "wiped off the face of the earth."
These latest developments have significantly increased the likelihood of further escalation of tensions in the Middle East, triggering a new round of price increases for crude oil on Monday. This phenomenon further confirms the widespread market expectation that war-driven energy price spikes will reignite inflationary pressures and prompt major central banks around the world, including the Federal Reserve, to adopt a more hawkish monetary policy stance. According to data from the CME Group's FedWatch Tool, the market now expects a 35% probability of a Fed rate hike before the end of the year, compared to less than 10% just last Friday.
A strong US dollar and hawkish expectations: two major obstacles for gold.
The aforementioned macroeconomic outlook continues to provide upward momentum for US Treasury yields and further supports the strength of the US dollar. In addition, the direct standoff between the US and Iran in the Strait of Hormuz is another factor contributing to the consolidation of the dollar's reserve currency status. This series of dynamics collectively confirms the negative outlook for gold in the short term, meaning that any subsequent attempts at price increases are more likely to encounter new selling pressure. Therefore, before confirming that gold prices have truly bottomed out and establishing further upside positions, it is prudent to wait for stronger and more sustained follow-through buying signals.
Technical Analysis: The bearish trend has not yet reversed.
From a technical analysis perspective, gold prices remain bearish in the short term, primarily due to their price consistently trading below the 200-period simple moving average on the four-hour chart (currently at $4655.02 per ounce). Furthermore, the precious metal is currently facing resistance from the 38.2% Fibonacci retracement level of the March-April rally. Although gold prices have rebounded slightly from the 50% retracement level (around $4500), their overall movement remains constrained by a dense resistance zone.
Meanwhile, indicators measuring market momentum remain weak. The Relative Strength Index (RSI) is currently hovering around 39.84, below the 50 neutral level, while the Moving Average Convergence Divergence (MAD) indicator is also in negative territory. These technical signals suggest that any attempt to rally is likely to fizzle out under supply pressure above the 38.2% Fibonacci retracement level (equivalent to $4595.23 per ounce). If prices continue to attempt to move higher, they may encounter resistance near the 200-period simple moving average ($4655.02), followed by resistance at the 23.6% retracement level ($4711.12).
On the downside risks, initial support is seen at the 50% retracement level of $4,501.57 per ounce, followed by the 61.8% retracement level at $4,407.90. If bearish pressure accelerates further, deeper support levels lie at $4,274.55 and then $4,104.68.
In conclusion: proceed with caution and wait for clear signals.
In conclusion, although gold prices have gained some upward momentum in the short term due to geopolitical tensions in the Middle East, multiple fundamental factors, including rising inflation expectations, a potential shift towards a more hawkish stance by major central banks, and a continued strengthening of the US dollar, limit the upside potential for gold. The bearish pattern presented by the technical charts also does not support blindly chasing the market higher. For market participants, maintaining a cautious wait-and-see approach and awaiting clearer technical and fundamental confirmation signals may be a more prudent strategy at this stage.
Frequently Asked Questions
Question 1: Since tensions in the Middle East usually benefit gold, why does this article argue that the upside potential for gold prices remains limited?
A: Geopolitical tensions in the Middle East will indeed trigger safe-haven buying of gold in the short term, thus driving a price rebound. However, the focus of this tension—the US-Iran standoff—has also brought the side effects of soaring oil prices and rising inflation expectations. Rising inflation expectations will prompt the market to bet on more hawkish monetary policies from major central banks such as the Federal Reserve (including possible further interest rate hikes), and interest rate hikes will increase the opportunity cost of holding non-yielding assets (such as gold). In addition, the tensions have also solidified the dollar's reserve currency status, leading to a stronger dollar. Therefore, although safe-haven demand provides some support for gold prices, the dual pressure from a strong dollar and expectations of interest rate hikes is stronger, significantly limiting the upside potential of gold.
Question 2: Through which specific channels does the tension between the US and Iran affect gold prices?
A: The tensions between the US and Iran are primarily impacting the gold market through three channels. First, the safe-haven channel: escalating conflict triggers market panic, prompting funds to flow into traditional safe-haven assets like gold, pushing up gold prices in the short term. Second, the inflation channel: the Strait of Hormuz is a crucial global oil shipping route; tensions lead to higher oil prices, which in turn raises overall inflation expectations. These inflation expectations reinforce the logic of central bank interest rate hikes, which is bearish for non-interest-bearing gold. Third, the exchange rate channel: geopolitical risks often increase the safe-haven appeal of the US dollar, especially when the conflict involves a direct adversary of the US, further highlighting the dollar's reserve currency status. A strong dollar typically puts downward pressure on dollar-denominated gold prices. Of these three channels, the negative effects of the latter two currently outweigh the positive effects of the first.
Question 3: Why did market expectations for a Fed rate hike rise sharply from less than 10% to about 35% in a short period of time?
A: The core driver of this shift in expectations is the surge in energy prices due to tensions in the Middle East. The significant rise in crude oil prices will directly impact downstream production and consumption, pushing up overall price levels. Market participants judge that the supply-side shock triggered by geopolitical conflict will reignite previously eased inflationary pressures. To curb the rebound in inflation, the Federal Reserve may be forced to abandon its previous wait-and-see approach and reconsider further interest rate hikes. Furthermore, a strong job market and the resilience shown by the US economy also provide conditions for a rate hike. Therefore, as the Persian Gulf situation unfolds, the probability of a rate hike before the end of the year, as reflected in the CME FedWatch tool, has jumped sharply in just a few days, from less than 10% to approximately 35%.
Question 4: From a technical perspective, what are the key resistance and support levels currently facing gold?
A: According to technical analysis, gold currently faces multiple resistance levels from top to bottom: the first resistance is at the 38.2% Fibonacci retracement level, around $4595.23 per ounce; the second, stronger resistance is at the 200-period simple moving average, around $4655.02; if the bulls can break through this level, the next target is the 23.6% retracement level, around $4711.12. On the downside, initial support is at the 50% retracement level, around $4501.57 per ounce; after breaking below this level, the next support is at the 61.8% retracement level, around $4407.90; if the bearish momentum intensifies further, deeper support areas are at $4274.55 and $4104.68 respectively. These technical levels provide important references for investors to determine buying and selling opportunities.
Question 5: Is there a contradiction between the strength of the US dollar and the safe-haven properties of gold? How should investors understand the relationship between the two?
A: There is no real contradiction between the two; rather, it's a dynamic game played out under specific circumstances. Gold and the US dollar are both important safe-haven assets, but market preferences shift depending on the situation. When global, non-US-led risk events occur (such as the European debt crisis), gold tends to perform better. However, when risk events directly involve the US's geopolitical rivals (such as the current US-Iran standoff), the dollar's safe-haven status is strengthened because investors tend to hold assets tied to US national power, military, and financial systems. Furthermore, the high interest rates resulting from the Federal Reserve's hawkish stance also enhance the dollar's attractiveness. Therefore, in the current environment, the dollar's strength has, to some extent, "stolen" some of the safe-haven funds that would otherwise flow to gold, thus weakening and offsetting gold's safe-haven function. Investors need to comprehensively assess the relative strength of gold and the dollar based on the nature of the risk events and the monetary policy context.
At 14:01 Beijing time, spot gold was trading at $4551.32 per ounce.
- Risk Warning and Disclaimer
- The market involves risk, and trading may not be suitable for all investors. This article is for reference only and does not constitute personal investment advice, nor does it take into account certain users’ specific investment objectives, financial situation, or other needs. Any investment decisions made based on this information are at your own risk.
