- Category: Global Markets | Central Bank Policy
- Spot gold (XAU/USD) prices recorded a sixth consecutive week of decline, with a single-day drop of over 1% on Friday due to multiple negative factors, closing at $4,155.76 per ounce, indicating that short-term market sentiment remains weak.
- Federal Reserve (Fed) officials' economic forecasts sent hawkish signals, with new Chairman Walsh emphasizing price stability as a core policy mission and hinting at the possibility of a rate hike within the year, driving the dollar index and U.S. Treasury yields higher, suppressing the valuation of non-interest-bearing assets like gold.
There are signs of easing in the macro geopolitical situation, with market expectations that the U.S. government will reach a new peace agreement with Iran and reopen the Strait of Hormuz, leading to a decline in oil prices and a reduction in the safe-haven premium of gold as a traditional hedging tool.
Hawkish Monetary Policy Increases Holding Costs
In the latest policy communication, the Fed's decision-makers have shown a significant shift in stance. Compared to the liquidity-easing rate cut expectations of previous quarters, several officials now believe it is necessary to maintain or even raise restrictive interest rate levels to address inflation risks that continue to deviate from target levels. In his first public statement, new Fed Chairman Walsh placed maintaining price stability as an absolute priority. This strong policy stance has led financial markets to reprice future liquidity tightening, with the dollar index and U.S. Treasury yields strengthening in tandem. Since gold assets do not have inherent interest income, the upward expectation of benchmark interest rates significantly increases the opportunity cost of holding gold, causing spot gold prices to remain under pressure and face a phase of correction.
Technical Focus on the $4,000 Strategic Defense Line
From a technical analysis perspective, after this round of continuous adjustments, the gold market has entered a directional tug-of-war observation range. Ole Hansen, head of commodity strategy at Saxo Bank, pointed out that the current gold price is operating below the 200-day moving average, which has significant bull-bear dividing significance, and there is a negative deviation of nearly $200 from this average. This technical pattern has suppressed the willingness of trend-following bullish funds to enter the market. However, analysis institutions generally believe that the $4,000 per ounce level is an important strategic defense line for the current long-term bullish trend. As long as the gold price can gain effective support above this position, the current continuous decline can still be seen as a phase technical correction since the macro bull market started in 2022, rather than a fundamental reversal of the overall upward trend.
Geopolitical Premium Decline Weakens Safe-Haven Buying
In addition to the direct pressure from monetary policy, the marginal easing of geopolitical situations also systematically suppresses gold's safe-haven buying. With external expectations that the new U.S. government is actively promoting a comprehensive new peace agreement with Iran, the long-troubled global supply chain Strait of Hormuz is expected to reopen. This macro development significantly alleviates market concerns about disruptions in the commodity supply chain. Oil prices have subsequently fallen, not only helping to curb global overall imported inflation pressure but also directly leading to a decline in the risk premium of risk assets, with gold's systemic appeal as a traditional safe-haven asset and inflation hedging tool showing a noticeable short-term decline.
Long-Term Macro Fundamentals Remain Strong
Despite short-term market sentiment being suppressed by hawkish policies and geopolitical cooling, the macro underlying logic supporting gold's long-term valuation has not fundamentally changed. Simon Peter Masabni, head of business development at XS.com, pointed out that major global economies' central banks continue to promote the diversification of official reserve assets and strategically increase gold holdings, combined with the U.S. government's continuously expanding fiscal deficit and sovereign debt scale, still constitute the most solid bottom support for gold prices. Samir Samana, head of global equity and real asset strategy at Wells Fargo, also emphasized that for gold to enter a long-term systemic downward channel, the prerequisite must be that major global economies can substantially constrain fiscal deficits and establish long-term price stability, but from the current actual direction of global macro policies, the probability of this scenario occurring is relatively limited.
Macroeconomic Data May Determine Short-Term Direction
Looking ahead, the short-term volatility direction of the gold market will be highly dependent on the key macroeconomic fundamental data to be released next week. The market focus has completely shifted to the final value of the U.S. first-quarter GDP and the Fed's core focus on the personal consumption expenditure index. After the Fed established a tightening policy tone, if future inflation data or real economic resilience exceeds market expectations, the market's pricing of more aggressive Fed tightening policies may be reassessed, thereby increasing the volatility range of gold prices near the key support level of $4,000 per ounce; conversely, if the data shows signs of slowing inflation, it may provide a temporary respite window for the gold market under valuation pressure.
