Analysis: Oil Price Suppression and Interest Rates Dampen Hedge Logic, Gold Price Under Short-Term Pressure But May Still Have Upside Potential in the Mid- to Long-Term

March 20th: Geopolitical conflicts typically boost risk-off sentiment in markets, pushing gold prices higher. For example, gold surged rapidly within half a month after the Russia-Ukraine conflict erupted in February 2022. However, since the latest U.S.-related conflict began, oil and the U.S. dollar have risen sharply while gold has trended continuously downward. Qu Rui, Senior R&D Deputy Director at Orient Securities, noted that the ongoing Middle East conflict and rising oil prices have lifted global inflation expectations—this could reinforce the Federal Reserve’s stance on holding interest rates steady, pressuring precious metals. Adrian Ash, an analyst at BullionVault, said: “Central banks’ future rate cuts will likely be further delayed. Technically, this is bad for gold.” Daniel Ghali, Commodities Strategist at TD Securities, commented: “In the short term, we still see downside risk in the market. Gold has significant room to fall, but it can also hold support from its long-term bull market uptrend.” Daniel Pavilonis of RJO Futures, a commodities broker, said: “If the current conflict persists, stocks and precious metals will keep falling—we could even see gold drop back to $4,200 an ounce.” Nicholas Frappell, Global General Manager at ABC Refinery, said gold has held key technical support levels on the weekly chart and may rebound to around $4,800 an ounce—the level it fell below earlier. Carsten Menke, Head of Research at Julius Baer, noted that amid tense Middle East conditions, gold needs a more pronounced risk-off shift in financial markets to truly rally. CITIC Securities pointed out that after past Middle East conflicts, gold’s medium-term trend still hinges on U.S. dollar credit and liquidity factors. Looking ahead to this round of conflict, the continuation of two key trends—looser liquidity and weaker U.S. dollar credit—will likely keep pushing gold higher. The firm is bullish on gold hitting new highs, which will drive gold sector stocks to new peaks as well. Previously, Bank of America projected gold will rise to $6,000 an ounce in the next 12 months. UBS forecasts the international spot gold price will hit $6,200 an ounce in the coming months.