Geopolitical tensions failed to boost safe-haven demand amid a strengthening dollar, and gold remains in a volatile consolidation.

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Source: Huizhong Finance

In the current context of ongoing geopolitical fluctuations, gold prices have not performed as strongly as market intuition might suggest, but instead have displayed characteristics of consolidation and even periodic corrections. This phenomenon has prompted a renewed examination of the effectiveness of gold’s safe-haven properties. According to market surveys, UBS’s CIO noted that while gold has been regarded as a safe-haven asset in the long term, its performance during the early stages of geopolitical conflicts tends to be unstable, with historical experience indicating that its movements are often dictated by more complex macroeconomic factors.

From a historical perspective, the performance of gold prices during different geopolitical conflicts has varied significantly. During the energy shock period of the 1970s, gold surged due to rapidly rising inflation, whereas during events such as the Iraq conflict, gold prices did not exhibit a clear upward trend. This indicates that gold’s movements are not solely driven by geopolitical risks, but rather depend on the prevailing inflation environment, expectations of monetary policy, and the pattern of global capital flows. Therefore, making simple comparisons between the current situation and historical events has notable limitations.

Returning to the current market environment, gold is facing multiple short-term suppressive factors. First, the rise in energy prices has led to an increase in inflation expectations, strengthening market anticipation for a tight monetary policy, thus putting pressure on the non-yielding asset of gold. Secondly, the strengthening of the U.S. dollar index has also exerted a significant suppressive effect on gold, as funds are more inclined to flow into high-yield assets. Furthermore, some investment funds have temporarily exited the precious metals market, further weakening gold’s upward momentum.

However, from a longer-term perspective, these suppressive factors may gradually weaken. As high energy prices drag on the economy and expectations for global growth slow down, there may be room for adjustment in future monetary policy paths. Once interest rate expectations peak or even reverse, gold’s allocation value will resurface. In this context, UBS believes that the current correction in gold should be viewed as a periodic adjustment within a long-term upward trend rather than a trend reversal.

From the perspective of market sentiment, the volatility structure of gold has also diverged. On one hand, spot price volatility has converged, indicating uncertainty about the short-term direction; on the other hand, the gold volatility index remains at relatively high levels, suggesting that potential risks have not been fully released. Investors’ sensitivity to geopolitical situations is declining, and the market is gradually returning to a fundamental pricing logic rather than being driven by emotions.

From a technical analysis standpoint, the daily structure of gold shows that prices are maintaining a range-bound oscillation pattern, with resistance concentrated around $4,700, a level that has been tested multiple times without effective breakthroughs, creating significant pressure; support levels are located in the $4,400 and $4,350 areas, constituting a mid-term defense line. The moving average system is flattening, indicating that the trend direction is still unclear. From the momentum indicators, the MACD is oscillating near the zero line, showing a balance between bullish and bearish forces; the RSI remains in a neutral range, indicating that the market has not entered an extreme state. Observing the 4-hour cycle, gold is presenting a converging oscillation structure, with the short-term volatility range gradually narrowing, short-term resistance located at around $4,550, and support near $4,400. If prices effectively break through the upper boundary of the range, it may open up new rebound space; conversely, if it falls below the lower support, it may further test mid-term lows. Overall, the current technical structure is primarily focused on repair, and trend opportunities still need to wait for fundamental support.

UBS further points out that from an asset allocation perspective, gold still holds significant importance. In a multi-asset portfolio, gold can not only hedge against inflation risks but also provide stability during periods of increased market volatility. Therefore, even if short-term prices still have downward potential, current levels offer certain attractiveness for long-term investors.

Editor’s Summary:

In summary, the current gold market is in a typical stage of “short-term pressure, long-term support.” While the geopolitical situation has not directly driven gold prices higher, its indirect impact on the macro environment is gradually becoming apparent. As the market shifts from emotion-driven to interest rates and economic fundamentals pricing, gold’s movements will increasingly depend on actual data changes. In the short term, gold prices are likely to remain range-bound, while in the medium to long term, under the backdrop of global economic slowdown and a shift in policy expectations, gold still possesses upward potential, and investors need to seek allocation opportunities amidst the volatility.

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Editor: Zhu Henan