Gold prices are exhibiting resilience, holding a positive bias above the $4,500 per ounce threshold as a softer US dollar provides temporary support. The June gold contract on COMEX was last seen at $4,550, up 0.6%, while silver rose 1.1% to $70.520 an ounce. The weakening dollar makes commodities priced in the currency less expensive for international buyers, stimulating demand.
However, this short-term strength is overshadowed by significant bearish macroeconomic pressures. Traders now anticipate a minimal likelihood of a US Federal Reserve interest rate cut this year, a stark shift from pre-conflict expectations of two cuts. This is driven by soaring energy prices—Brent crude surpassed $115 a barrel, recording a 60% monthly increase in March—which intensify inflation fears and restrict the potential for monetary easing. High and restrictive real interest rates increase the opportunity cost of holding non-yielding gold.
The price of gold has dropped over 15% in March, its steepest monthly decline since October 2008. "The yellow precious metal, which is typically sought as a safe haven in times of war, is under heavy pressure due to shifting interest rate expectations, which in turn are driven by the looming inflation shock," said Barbara Lambrecht, commodity analyst at Commerzbank AG.
Technical analysis also points to underlying weakness. The metal has been range-bound between $4,300 and $4,500. Analysts note the recent breakdown below the 100-day Simple Moving Average (SMA) near $4,630 suggests a bearish consolidation phase. While the Relative Strength Index (RSI) has recovered from oversold levels to the mid-30s, indicating easing bearish pressure, momentum indicators like the Moving Average Convergence Divergence (MACD) remain in negative territory. The rally is also occurring on declining volume, a classic divergence that often precedes a reversal.
Market structure reveals a potential inflection point. Commitment of Traders reports show speculative managed money building net-long positions, while commercial hedgers (producers) are increasing short-side activity around $4,500, viewing it as an attractive selling level. A key support zone is seen at $4,450; a break below could trigger a deeper correction toward $4,300.
