Zhang Yao Xi: Inflation Rising, Powell Turns Hawkish, Gold Prices Await Another Pullback Before Rising Mid-Week

Zhang Yaoxi: Rising inflation prompts Powell to turn hawkish, gold prices await a retest of the weekly midpoint for a rebound

On the previous trading day, Wednesday (March 18): International gold prices sharply declined and closed lower, as Iran threatened to attack multiple energy facilities in the Middle East, driving crude oil prices higher. Additionally, the U.S. February PPI year-over-year and month-over-month figures significantly exceeded expectations, raising inflation concerns. Later, the Federal Reserve kept interest rates unchanged, but Powell mentioned the possibility of rate hikes, boosting the dollar sharply. The continued pressure pushed gold prices lower, breaking below the 60-day moving average support level, with bears maintaining dominance. Before returning above the $5,000 level, the market may further decline toward the 100-day moving average at $4,600 or extend support at $4,545, potentially setting the stage for a rebound.

In terms of specific movement, gold opened in Asia at $5,005.62 per ounce, fluctuated to a daily high of $5,015.90, then began a steady decline during European trading hours. Despite a brief rebound to around $4,900 after touching $4,834 at the US open, momentum was weak, and prices eventually plunged again, hitting a daily low of $4,806.84. The day closed at $4,818.81, with a daily range of $209.06, down $186.81, or 3.73%.

Looking ahead to Thursday (March 19): International gold opened slightly higher, with some rebound potential during the day. The dollar index and crude oil saw profit-taking early, weakening their trends but providing some support for gold. A sustained rise requires breaking above the 60-day moving average and the $5,000 level; otherwise, further decline toward the 100-day moving average support near $4,600 is expected.

Key data releases today include U.S. initial jobless claims for the week ending March 14, the March Philadelphia Fed Manufacturing Index, January wholesale sales month-over-month, and January new home sales annualized figures. Overall, these are expected to be positive for gold, suggesting the market will likely see sideways or rebound movements.

Fundamentally, the recent gold sell-off was driven by soaring energy prices boosting inflation expectations, which significantly lowered expectations for Fed rate cuts. Coupled with Powell’s comments, the dollar surged, creating a bearish environment for gold.

In the short term, gold may face further downside pressure. However, from a medium- to long-term perspective, the overall trend remains upward. Prolonged energy disruptions and rising oil prices will intensify inflation and economic growth impacts, potentially shifting the macro environment to a bullish stance on gold. The Fed’s shift toward easing policy would further amplify this trend, increasing the upside potential and space for gold prices. Before that, monitoring correction strength and sideways consolidation on weekly charts could present re-entry opportunities.

Technically, on a monthly basis, gold has continued to weaken this month, erasing February gains and forming a bearish engulfing pattern, indicating a potential top and a correction toward the upward trendline broken in January. If prices remain above this line, a continued rise over the next few years is expected; otherwise, a bearish turn toward $3,500 or lower is likely.

On the weekly chart, gold has been declining for 5-10 weeks, falling below the 5- and 10-week moving averages. The accompanying indicators have turned bearish, suggesting a potential move toward the midline or the 30-week moving average support. However, this level has historically been a rebound point during this bull market, so a new rally could occur either after sideways consolidation or a retest of support near the 30-week moving average.

On the daily chart, yesterday’s sharp decline broke the previous consolidation and bottoming pattern, further breaking below the 60-day moving average, with bearish momentum increasing. The 60-day moving average and prior support levels now act as resistance. The market will either regain strength above $5,000 for further rebound or continue downward to test the 100-day moving average support. In the short term, focus on intraday trading signals.

Gold: Support levels at $4,755 or $4,650; resistance at $4,890 and $4,955.
Silver: Support at $74.35 or $73.35; resistance at $77.90 and $79.25.
Note:
Gold TD = (International gold price × exchange rate) / 31.1035
A $1 fluctuation in international gold prices roughly translates to a $0.25 change in Gold TD (theoretically).
U.S. futures gold price = London spot price × (1 + gold swap rate × days to expiry / 365)
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The above opinions and analysis represent only the author’s personal views, for reference only, not as trading advice. Operate at your own risk.
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