Gold prices still lack the momentum for a significant rebound in the short term. Besides the increasing likelihood of a continued escalation of the conflict in Iran, which is suppressing the willingness to buy gold due to its perceived risk-averse nature, another source of pressure is the growing negative sentiment among investors that the Federal Reserve is likely to raise interest rates by at least a quarter percent this year. Since Fed rate hikes to curb inflation are inevitable, and the pace of rate increases could accelerate, funds invested in gold would not only lack interest income but also be subject to price volatility. Therefore, conservative funds will inevitably leave the gold market and hold cash, which explains why gold prices are currently trending towards small gains followed by larger pullbacks.

If the US dollar index shows an upward trend in the short term, this clearly indicates to the market that the Fed’s rate hike pace this year may be faster than previously expected. The correlation between the dollar and interest rates should put downward pressure on gold prices in the short term.

A short position can be established around $4,048, with a short-term target of $3,959 for profit-taking, and a stop-loss at $4,068.

Gold Price 1-Hour Chart:

Ferris Kwok

Chief Analyst
Success Finance Group

Email: ferris.kwok@successfn.com