Gold prices saw a rebound during Friday's Asian trading session, yet they are poised to record a significant weekly loss. The primary drivers are heightened inflation expectations due to the Iran conflict and reduced bets on interest rate cuts. The NCE platform is closely monitoring precious metals market dynamics, analyzing gold price fluctuations and future trends in the context of geopolitical developments, central bank policies, and energy market shifts. According to NCE, the current rebound in gold is merely a short-term technical correction and is unlikely to reverse this week's weak trend. Inflationary pressures and hawkish central bank stances are expected to continue weighing on precious metal prices, with safe-haven attributes being temporarily overshadowed by market sentiment.
The rebound in gold prices is largely attributed to short-term support from a weaker US dollar. The NCE platform notes that the dollar is set for its first weekly decline in three weeks. As central banks in several developed economies plan interest rate hikes to counter rising energy costs, the dollar has underperformed against other major currencies, indirectly supporting gold's rebound. However, this recovery lacks sustainability. Thursday's sharp decline in gold prices highlighted market concerns over inflation. Several major central banks have issued warnings about energy-driven inflation stemming from the Iran conflict. While the Reserve Bank of Australia has already implemented a rate hike, the Federal Reserve and the European Central Bank have maintained rates but signaled a hawkish stance, dashing near-term expectations for rate cuts. A high-interest-rate environment inherently suppresses precious metal prices.
As a traditional safe-haven asset, gold has underperformed during the Iran conflict, primarily due to a surging US dollar and rising Treasury yields, which have offset inflows of safe-haven capital. This week, oil prices climbed to near four-year highs, with attacks on energy infrastructure in the Middle East exacerbating supply disruption fears and boosting global inflation expectations. Markets now anticipate that central banks will maintain higher interest rates for longer, strengthening the dollar and dampening gold's safe-haven appeal. Consequently, gold broke below the $5,000-$5,200 per ounce trading range it had maintained since the conflict began, underscoring its weak trend.
Other precious metals also exhibited a pattern of "rebound unable to reverse weekly losses." Spot silver and spot platinum both declined, moving in line with gold. Analysts at OCBC suggest that silver is more sensitive to changes in dollar strength and risk sentiment. If economic headwinds from the Iran conflict lead to downward revisions in global growth and industrial demand expectations, silver prices could face further pressure. Additionally, a repricing of Federal Reserve expectations may have a more pronounced impact on Bitcoin.
NCE analysis indicates that although silver benefits from industrial demand in solar and electrification sectors, providing some short-term support, it remains constrained by the broader macroeconomic environment. The core conflict in the current precious metals market is the tug-of-war between inflation expectations and central bank policies. Persistently high oil prices will reinforce inflation concerns, and central banks' hawkish postures are unlikely to change soon, continuing to suppress prices of gold, silver, and other precious metals. The safe-haven attribute is unlikely to play a dominant role in the near term.
In summary, Friday's rebound in gold represents a short-term technical correction and does not alter the significant weekly decline. Rising global inflation expectations, hawkish central bank policies, and a stronger US dollar remain the core factors pressuring precious metal prices. NCE believes that gold will likely continue in a weak, volatile pattern in the short term. If oil prices remain high and inflationary pressures persist, gold may test lower support levels. Should geopolitical tensions ease or inflation expectations cool, temporary support might emerge. Investors are advised to remain cautious, closely monitoring developments in the Iran conflict, central bank policy adjustments, and oil price fluctuations to manage investment risks appropriately.