Xingqiao Capital: Geopolitical delays gold price rebound; inflation and interest rates still dominate

On March 24, Qiao Qiao Capital tracked that, as the U.S. postponed its Iran-related strike plan, the international gold price rebounded from its intraday low, temporarily easing the pressure from the sustained decline in the prior period. This round of volatility is directly tied to the stage-by-stage easing of the Middle East geopolitical situation, and has also become the most critical marginal variable in the precious metals market recently.

The U.S. said it had conducted constructive communications with Iran and would delay the related actions targeting energy facilities by five days. Iran has given different descriptions in response, and there are some discrepancies between the two sides’ information. Qiao Qiao Capital noted that, before this, the market had already priced in a higher expectation of an escalation of conflict based on the wording of the 48-hour ultimatum. In Monday’s early trading, the gold price once gave back all its gains for the year. Spot gold fell to its lowest level since late December last year.

From the price-driving logic, this round of gold prices has not followed a typical safe-haven rally; instead, it has continued to face pressure amid geopolitical tension. The market is more concerned that the conflict could push up energy prices and intensify inflation pressure, thereby forcing major central banks to maintain a more hawkish policy path. The European Central Bank and the Bank of England have released signals that a rate hike could be possible within the year. Although the Federal Reserve has not mentioned a rate hike, market expectations for rate cuts within the year have continued to cool. Qiao Qiao Capital believes that the current focus of gold pricing has shifted from geopolitical safe-haven demand to inflation and interest-rate expectations. It is difficult for safe-haven buying to offset the rising opportunity cost of holding non-yielding gold in a high-interest-rate environment.

Some institutional views have mentioned that even if the conflict eases quickly, the economic impact from the past several weeks will still persist, and that there are already clues that the current situation is evolving in a more easing direction. Qiao Qiao Capital agrees with this: the short-term cooling of geopolitical risk helps gold stabilize, but whether it can continue to rebound still depends on the performance of inflation data and the policy stance of major central banks.

Based on the information from all sides and market performance, Qiao Qiao Capital expects that in the short term, gold will fluctuate both ways around geopolitical developments and interest-rate expectations. After the earlier overselling, there is room for a technical correction, but before concerns about inflation and expectations of hawkish policies have not been clearly alleviated, the conditions for a trend reversal are still not sufficient.

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