Gold prices stabilized on Wednesday but remained near a one-month low, trading around $4,590–$4,594 an ounce after a sharp 2.4% decline over two sessions. The precious metal been under significant pressure due to the ongoing U.S.-Iran military conflict and anticipation of the Federal Reserve's latest interest rate decision.
The U.S.-Iran war, which began in late February, has seen gold lose roughly 13% of its value. The conflict's impact on global oil markets is a key driver: the indefinite closure of the Strait of Hormuz has disrupted oil supplies, pushing crude prices higher and fueling fears of oil-driven inflation. This environment makes it more likely that central banks will maintain higher interest rates for longer. Higher rates are generally bearish for gold, as the metal offers no yield, increasing its opportunity cost compared to bonds.
According to a Wall Street Journal report, President Trump has instructed aides to prepare for a prolonged naval blockade of Iran aimed at cutting off its oil exports. Iran has requested the U.S. lift the blockade for negotiations, with mediators in Pakistan indicating Tehran might submit a revised proposal soon. Analysts at OCBC noted that gold needs either a drop in oil prices or signs of easing geopolitical tensions to recover, both of which remain elusive. Ole Hansen of Saxo Bank highlighted that a break below the $4,650 support level triggered technical selling and that reopening the Strait of Hormuz would provide the biggest short-term boost for gold.
The broader market is now focused on the Federal Reserve, which is widely expected to hold interest rates unchanged at the conclusion of its two-day meeting. Investors will scrutinize the Fed's statement, economic projections, and the dot plot for clues on future policy. Current market pricing suggests a 65% probability of a rate cut by September. A dovish stance could trigger a gold rally above $4,600, while a hawkish surprise might push prices below $4,400. The Fed's inflation outlook is crucial, as persistent inflation delays rate cuts and strengthens the dollar, pressuring gold.
Technical indicators show gold vulnerable below the psychological $4,600 mark. The 50-day moving average has turned downward, confirming short-term selling pressure. Immediate support lies at $4,500, with a break below that potentially leading to $4,400. The Relative Strength Index (RSI) stands at 42, indicating bearish momentum but not oversold conditions.
