Gold Price Prediction: Range-Bound Trading with Bearish Bias Amid Geopolitical Tensions
Gold prices are expected to trade within a range with a bearish bias as diplomatic efforts between the United States and Iran have collapsed, according to Praveen Singh, Head of Currencies and Commodities at Mirae Asset ShareKhan. The failure of weekend talks in Islamabad, Pakistan, and the subsequent US blockade of the Strait of Hormuz have heightened supply concerns, impacting oil prices and market sentiment.
Gold Performance and Market Movements
On April 13, spot gold tumbled to $4633 during Asian trading hours as oil prices spiked due to supply risks. This decline followed US President Trump's threat to blockade the Strait of Hormuz after the US and Iran failed to reach an agreement. At the time of writing, spot gold was hovering around $4710, marking a daily loss of nearly 0.90%.
Earlier, on April 10, the yellow metal closed with a loss of 0.37% at $4748, despite a weaker US Dollar and the University of Michigan Sentiment index tumbling to record lows in its preliminary April reading. However, spot gold posted a weekly gain of 1.5%, its third consecutive weekly increase, as traders remained hopeful ahead of the scheduled US-Iran talks.
Geopolitical Tensions and Oil Market Impact
The US-Iran talks collapsed as the two sides remained far apart on critical issues, including control of the Strait of Hormuz, reparations, uranium enrichment, and Lebanon strikes. Following the failure, President Trump threatened a blockade of the Strait, which Iran deemed illegal. The blockade has since taken effect, impacting oil flows.
Iran has been shipping nearly 2 million barrels per day of crude oil even during the conflict, and Iraq has sought permission to ship oil through the Strait, with its flow also likely affected. Crude oil surged nearly 10% on Monday due to rising supply risks, as the US blockade could choke remaining flows. Iran has also threatened ports in the Persian Gulf, while the US-Iran-Israel ceasefire holds, though Israel-Hezbollah strikes continue.
Economic Data and Market Indicators
Recent US data showed mixed signals. Existing home sales data released on Monday were mixed, while Friday's data revealed that US CPI surged by 3.3% year-over-year in March from 2.4% in February, the highest in nearly two years, driven by skyrocketing gasoline prices due to the Iran war. CPI inflation rose by 0.90% month-over-month, the most in nearly four years.
The University of Michigan consumer sentiment slumped from 53.30 in March to 47.60 in April, a record low, with one-year inflation expectations surging to 4.8%, the highest since August. China's credit expansion slowed more than expected in March, with aggregate financing increasing 5.2 trillion yuan, below the median forecast of 5.6 trillion yuan.
Gold ETF Holdings and Dollar Index
As of April 10, total known global gold ETF holdings stood at 98.69 million ounces, up 0.8% from the cycle low of 97.89 million ounces reached on March 31, but down 2.25% since the Iran war broke out on February 28.
The US Dollar Index was at 98.75, up 0.10% at the time of writing. Two-year and ten-year US yields were at 3.80% and 4.32%, respectively, each up by 1 basis point.
Central Bank Expectations and CFTC Data
Overnight rates imply a 0.15 rate cut by the Federal Reserve by year-end, while the European Central Bank and the Bank of England are expected to hike rates 2.75 and 2 times, respectively.
According to CFTC data, money managers decreased their bullish gold bets by 1,759 net-long positions to 92,113 lots in the week ending April 7, the least bullish in over two years. Long-only positions rose 1,846 lots to 122,382 lots, the highest in three weeks, while short-only positions rose 3,605 lots to 30,269, the highest in more than five months.
Upcoming Data and Events
Key upcoming US data include March PPI on April 14, import price index on April 15, and TIC flows and industrial production on April 16. Traders will also monitor China's trade balance on April 14, and first-quarter GDP, retail sales, industrial production, and property data on April 16.
Eurozone's March CPI will be released on April 16, and Fed Governor Waller will speak on the economic outlook on April 17 at Auburn University.
Gold Price Outlook and Support Levels
The collapse of US-Iran talks and the US blockade of the Strait of Hormuz have reduced the likelihood of a diplomatic solution soon, though talks remain a possibility. Crude oil prices are expected to trade with a positive bias due to increasing supply concerns, which will keep the US Dollar Index and yields firm as central banks renew vigilance on inflationary pressure.
Risk assets are bid on earnings expectations, holding back the US Dollar, but this situation may not last unless the US and Iran reach a convincing deal. Gold is expected to range trade with a bearish bias as markets retain some optimism about a deal, with the ceasefire holding for another week. The metal may test support at $4600/$4550, with interim support at $4684 and resistance at $4800/$4900.
Disclaimer: Recommendations and views on the stock market, other asset classes, or personal finance management tips given by experts are their own. These opinions do not represent the views of The Times of India.
