Gold and silver faced selling pressure over the weekend of March 22nd, influenced by a surge in bond yields and a strengthening US dollar, which reduced demand for dollar-denominated, zero-yielding assets such as precious metals. However, this sell-off was not solely driven by traditional factors. The two metals have been behaving more like risk assets than safe havens, falling alongside equities during periods of heightened volatility.

These trends were potentially intensified at the start of the week by geopolitical developments over the weekend. Former US President Donald Trump threatened to "completely destroy" Iran's power plants within 48 hours if the Strait of Hormuz was not fully reopened. Iran responded by stating that in such an event, it would close the strait and strike US-related energy and infrastructure throughout the Gulf, thereby raising the risk of a more significant supply shock.

The escalation of risk stems from the potential consequences of these threats being acted upon, as it is easy to foresee how the situation could deteriorate. Iranian retaliation could target critical energy and social infrastructure in the Gulf region, creating expectations of widespread and potentially prolonged production disruptions. This is more significant than the strait itself, as direct damage to supply would make shipping routes a secondary concern.

The market's sensitivity to such shocks was already evident. Damage to a major natural gas facility in Qatar last week triggered a sharp reassessment of global short-term interest rates, pushed inflation expectations higher, and exerted upward pressure on longer-dated yields. Any similar or larger supply shock carries comparable risks. These factors contributed over the weekend to a yield-driven selling pressure on gold and silver.

A correlation matrix reinforces this shift. The correlation between gold and US stock index futures strengthened significantly over the past week, reaching a magnitude almost equivalent to the negative correlation between gold and the US two-year Treasury yield during the same period. While both relationships can be traced back to energy price movements, risk appetite is currently playing a more dominant role.

This is crucial for interpreting price action this week. If equities stabilize or continue to rise, the likelihood of gold finding support increases. Conversely, if risk sentiment deteriorates again, the metals could face further downward pressure.

The relationship with volatility tells a similar story. Gold shows only a weak negative correlation with VIX futures, with no real indication that its performance aligns with that of a traditional safe-haven asset.

On March 24th, gold staged a strong rebound. The most positive news since the conflict began emerged on March 25th. According to media reports, Trump stated that talks with Iran were making progress, with the US submitting a 15-point ceasefire proposal and seeking a one-month truce for negotiations. Although Iran denied direct dialogue, talks might be mediated by a third country. Pakistan, which maintains good diplomatic relations with both the US and Iran and hosts no US military bases, expressed willingness to host peace talks.

Simultaneously, Iran informed the United Nations that "non-hostile" vessels could pass through the Strait of Hormuz. This is expected to further normalize the transit of 20% of the world's oil and liquefied natural gas, effectively alleviating fears of supply shortages. Freight rates for Very Large Crude Carriers (VLCCs) from the Middle East to China have fallen from a peak of $615,000 per day to approximately $365,000 per day, suggesting the worst phase for global crude supply may be over.

Following this news, oil and the US dollar fell. For the dollar, despite the slight possibility of a Fed rate hike this year, a de-escalation of geopolitical risks would significantly diminish its safe-haven appeal. Furthermore, as other major central banks appear more hawkish, interest rate differentials may not support the dollar's strength for long. If the US cannot end the conflict from a position of strength, its strategic advantage in the Middle East and the associated petrodollar system could be substantially weakened. Therefore, the dollar is likely to return to a weaker trend in the medium to long term.

However, it is important to note that Iran has not confirmed the ceasefire talks and is unlikely to accept all 15 points. Trump's "five-day delay" ultimatum remains, and US military deployments are ongoing. The situation could reverse abruptly, so traders must maintain robust risk management.

Technically, a break below the 50-day moving average triggered accelerated liquidation in gold. Importantly, the sequence of higher lows formed since the late January sell-off has ended, with the price breaking and closing below the uptrend support line from late October on March 20th.

On the downside, $4,405 is a key level to watch, having previously acted as both support and resistance. A breach of this level could target $4,245, $4,150, and $4,100, respectively. Both the RSI (14) and MACD indicators are trending downward and continue to signal a bearish bias, favoring a negative outlook for now. However, while the expansion of the Bollinger Bands indicates increased volatility and the price is currently below the lower band, a squeeze risk is evident.

A price recovery towards the October uptrend line near $4,665 could be significant for both bulls looking to exit positions and bears considering new shorts. Clear rejection at this level would favor a resumption of the downtrend, while a decisive break above would cast serious doubt on the potential for a longer-term decline.

Silver is approaching a critical technical area. Earlier gains in silver were largely driven by a short squeeze, with little connection to precious metal fundamentals. Now, silver lease rates have fallen back to 2%, returning to normal levels. The physical market short squeeze has ended, leaving futures market dynamics as largely speculative, which is unlikely to be sustained.

The daily chart for silver shows a pattern highly similar to gold. On Wednesday, the price broke below a support zone comprising the 23.6% Fibonacci retracement of the January-February decline at $77.68 and the horizontal support at $78.25, paving the way for accelerated selling for the remainder of the week.

With the RSI (14) trending lower but not yet in oversold territory, and the MACD turning negative after crossing below its signal line, the bearish bias is confirmed, suggesting selling on rallies is preferable.

The immediate downside target is the convergence of several key areas: the February low of $64.10, the horizontal support at $64.65, and the uptrend line established last August, currently around $63.50. The latter acted as support before the late-year price surge and has not been retested since, making it a critically important zone for assessing medium-term directional risk.

Further downside reveals only minor support levels before the 200-day moving average. That said, silver trading below the lower Bollinger Band increases the risk of a short-term squeeze, making aggressive selling at current levels more challenging.

On the upside, the downtrend formed over the past two weeks serves more as a reference point than meaningful resistance. The true battleground is around the $70 high, which was the starting point of last week's breakdown.