On March 4, our analysis on the previous Tuesday highlighted that the military conflict between the United States and Iran led to a sharp spike in international oil prices. This development intensified inflationary pressures, dampening market expectations for interest rate cuts by the Federal Reserve. Consequently, the U.S. dollar and Treasury yields experienced significant short-term gains, which in turn exerted downward pressure on gold prices. Short-term technical indicators also suggested that after failing to break higher, gold was due for a correction. Therefore, our trading recommendations advised monitoring resistance levels at $5,300 and $5,350, followed by $5,400, with support levels at $5,226 and $5,200. A further decline would bring the $5,130 level into focus.
Subsequent market movements showed that during the European session on Tuesday, gold rebounded to $5,287 before encountering resistance and turning lower. After breaking below the previous low of $5,226, it experienced a sharp drop, stabilizing at $5,160. A rebound to $5,209 met resistance, leading to another rapid decline to $5,074, where it found support. Following another failed attempt to surpass $5,226, gold remained under pressure, falling to stabilize at $4,996. Subsequently, the price oscillated higher, reaching $5,190 during the Asian session on Wednesday before facing resistance. During this period, rebounds were primarily capped near $5,130. After rising to $5,187, the price retreated to test this level again, found support, and continued its rebound, reaching a daily high of $5,202 during the European session. The metal is currently trading around $5,194. Overall, gold experienced a significant drop of over $300 on Tuesday, with short-term volatility indicating a corrective phase, largely aligning with our expectations.
Analysis suggests that while the military conflict between the U.S. and Iran over the weekend rapidly heightened market risk aversion, gold failed to sustain its initial gains. After hitting a peak and encountering resistance on Monday, it gave back all its advances and fell sharply on Tuesday, failing to attract significant safe-haven flows. The primary reason is that the conflict-driven surge in oil prices has exacerbated global inflation concerns, pushing back expectations for the Fed's first rate cut this year. This supported a strong rally in the U.S. dollar and Treasury yields at the start of the week, which negatively impacted gold. Furthermore, amid extreme market uncertainty stemming from geopolitical tensions, holding cash remains a preferred strategy. This has triggered heavy selling across global equities, bonds, gold, and silver, with oil and the U.S. dollar emerging as the primary beneficiaries. The rebound in gold on Wednesday, extending its recovery from the overnight low, is primarily driven by a return of safe-haven demand and continued strong buying interest from central banks, which continue to provide underlying support for the price.
On the daily chart, gold experienced a sharp decline on Tuesday after failing to break higher, but the stabilization and rebound on Wednesday have alleviated some of the immediate downward pressure. Key support levels to watch include the $5,130 area, which acted as a primary resistance point during Tuesday's recovery. After breaking above this level intraday, a pullback found support there before prices moved higher again. Further support is seen near the day's low around $5,080, which is also near the middle band of the Bollinger Bands on the daily chart. For resistance, the focus is on whether gold can sustain a break above the psychological $5,200 level. A firm hold above this point could pave the way for further gains towards the 4-hour chart's Bollinger Band middle band at $5,250, followed by the $5,300 level. Technical indicators show the 5-day moving average's golden cross turning lower, the MACD indicator forming a death cross, the KDJ indicator in a bearish death cross, and the RSI indicator's death cross turning upward. These short-term signals collectively indicate a need for correction after the failed attempt to advance.
Intraday outlook for gold: The U.S.-Iran conflict, by driving oil prices higher, has intensified global inflation pressures and suppressed Fed rate cut bets. Concurrent demand for cash has triggered sell-offs in stocks, bonds, gold, and silver, collectively weighing on the gold price. However, the return of safe-haven flows and persistent long-term central bank purchasing demand are supporting the rebound, easing near-term selling pressure. Trading strategy recommends a range-bound approach. Key support is seen at $5,130, followed by $5,080. Resistance is focused on a decisive break above $5,200; a sustained move above this level could open a path towards testing $5,250 and subsequently $5,300.
