NCE Platform: Gold Price Rebound Fails to Change Weekly Downtrend

On March 20, Friday during the Asian trading session, gold prices rebounded, but the weekly closing is still expected to be significantly lower. The core reason is that the war in Iran has raised inflation expectations and weakened rate cut bets. The NCE platform closely monitors dynamics in the precious metals market, interpreting the logic behind gold price fluctuations and subsequent trends in conjunction with geopolitical situations, central bank policies, and changes in the energy market. The NCE platform believes that this rebound in gold prices is merely a short-term technical correction and is unlikely to reverse the weak trend of the week. Inflation pressures and the central bank’s hawkish stance will continue to suppress precious metal prices, while the safe-haven attribute is temporarily obscured by market sentiment.

The rebound in gold prices is mainly attributed to short-term support from a weaker dollar, the NCE platform states. The dollar is expected to experience its first weekly decline in three weeks, lagging behind other major currencies due to several developed economies’ central banks planning interest rate hikes in response to rising energy prices, indirectly supporting the rebound in gold prices. However, this rebound lacks sustainability; the significant drop in gold prices on Thursday has highlighted the market’s concerns regarding inflation. Several major central banks have issued warnings about energy-driven inflation caused by the war in Iran, with the Reserve Bank of Australia already implementing rate hikes, while the Federal Reserve and the European Central Bank have maintained rates and signaled hawkishness. The expectations for rate cuts in the short term have completely evaporated, and the high-interest-rate environment inherently suppresses precious metal prices.

As a traditional safe-haven asset, gold’s performance during the war in Iran has been disappointing, primarily due to the surge in the dollar and U.S. Treasury yields, which have overshadowed the inflow of safe-haven funds. This week, oil prices soared to nearly four-year highs, and attacks on Middle Eastern energy infrastructure have further exacerbated concerns over supply disruptions, raising global inflation expectations. The market’s anticipation of central banks maintaining high interest rates has strengthened the dollar, suppressing the safe-haven upward momentum of gold prices, causing gold to break below the $5000-$5200 per ounce trading range maintained since the onset of the war, highlighting the weak trend.

Other precious metals also exhibit a “rebound does not change the weekly decline” trend, with spot silver and spot platinum both declining in line with gold’s performance. Analysts at OCBC Bank believe that silver is more sensitive to changes in the dollar’s strength and risk sentiment. If the economic resistance brought by the war in Iran leads to downward revisions in global growth and industrial demand expectations, this will further drag down silver prices, while the repricing of expectations from the Federal Reserve will also have a more pronounced impact on Bitcoin.

The NCE platform analyzes that while silver benefits from industrial demand in the solar energy and electrification sectors, it may receive some support in the short term, but overall, it still struggles to escape the suppression of the macro environment. The core contradiction in the current precious metals market is the game between inflation expectations and central bank policies. Sustained high oil prices will further intensify inflation concerns, and the central bank’s hawkish stance is unlikely to change in the short term, which will continue to exert pressure on the prices of precious metals like gold and silver, making it difficult for their safe-haven attributes to play a dominant role.

In summary, the rebound in gold prices on Friday is a short-term technical repair and cannot reverse the significant downward trend of the week. Rising global inflation expectations, the central bank’s hawkish stance, and a stronger dollar remain the core factors suppressing precious metal prices. The NCE platform believes that in the short term, gold prices will continue to be in a weak oscillating pattern. If oil prices remain high and inflation pressures do not ease, gold prices may further test support levels; if the geopolitical situation eases and inflation expectations cool down, there may be temporary support. Investors should remain cautious and focus on the developments in the Iran war, adjustments in central bank policies, and fluctuations in oil prices to manage investment risks effectively.

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Editor: Chen Ping