Huang LiChen: Rising Oil Prices and Hawkish Fed Stance Directly Pressure Gold Prices

On March 20th, yesterday, Thursday, we believed that Iran’s oil facilities were attacked on Wednesday, which drove oil prices sharply higher. The market turned from a decline to a rise that day. High oil prices will intensify inflationary pressures and may force the Federal Reserve to maintain high interest rates for a longer period, again suppressing gold prices. In the short term, technical indicators also show that gold faces the risk of further decline. Therefore, in terms of trading, it is recommended to monitor the gains and losses around $4,800. If the price continues to break downward, the next support level is temporarily at $4,700. If a short-term stabilization occurs, the rebound could target $4,860 and $4,900.

Looking at the subsequent trend, after the Asian session opened yesterday Thursday, gold fell back to $4,804 and stabilized. It faced resistance at $4,866 during the rebound. After the European session opened, gold broke downward, losing the key level of $4,800. It continued to decline all the way until the US session opened, reaching a daily low of $4,502, a drop of over $300. Afterwards, gold stabilized and rebounded, closing at $4,650, recovering nearly half of the decline. Overall, gold was under pressure and continued its previous downward trend, with the short-term decline slightly exceeding expectations.

Wolfinance star analyst believes that after a sharp decline on Wednesday, gold fell again on Thursday, hitting a new low in over a month, mainly due to volatile energy prices and hawkish central bank stances, which suppressed gold prices. Specifically, after the escalation of conflict between the US and Iran, oil prices rose. On Wednesday, Iran’s oil facilities were attacked, prompting Iran to launch large-scale attacks on US-related oil and energy infrastructure. This pushed Brent crude oil prices sharply higher on Wednesday, continuing to rise and increasing inflationary pressures, which could force the Fed to keep interest rates high for a longer period. The Fed maintained rates unchanged on Wednesday and publicly stated that due to the uncertainty in the Middle East, there might only be one rate cut this year. The Fed chair emphasized that progress in reducing inflation is necessary to start cutting rates, and inflation expectations for this year were raised to 2.6%, directly pressuring gold prices. After a significant drop on Thursday, gold stabilized and rebounded nearly $150, driven by the fact that Brent crude oil prices surged and then retraced all gains.

On the daily chart, gold initially stabilized with some oscillation at the beginning of the week. By Wednesday, the price broke downward, with a sharp short-term decline, showing very weak momentum. Support levels below gold include $4,600, near the middle of the Bollinger Bands on the weekly chart; next, $4,500, near Thursday’s low; and a new low around the February low at $4,400. Resistance levels above include $4,720, near the lower Bollinger Band on the daily chart; and $4,800, which was broken on Thursday, leading to a sharp decline. The 5-day moving average and MACD are showing a death cross downward, while the KDJ indicator is showing a death cross with an upward turn, and RSI is clearly slowing down its death cross. Short-term technical indicators suggest that gold still faces the risk of further decline, but after a large drop, there is a demand for rebound correction.

Intraday gold reference: After Iran’s oil facilities were attacked, a proportional escalation occurred, causing oil prices to surge sharply, increasing inflationary pressures, and combined with the hawkish stance of the Federal Reserve, which directly suppressed gold prices. It is recommended to adopt a cautious, oscillating approach. Resistance levels are at $4,720 and $4,800; support levels are at $4,600 and $4,500, with further declines targeting $4,400.

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Editor: Chen Ping