Breaking! Yemen Houthi forces join the battlefield, gold briefly plunges to 4420, and central bank sales have a huge impact?

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Source: 24K99

On Monday (March 30), international gold prices fell, erasing the first weekly gain since the outbreak of the Middle East war; at the same time, Iran-backed Houthi forces joined the conflict, with more U.S. military personnel being redeployed to the region.

In early trading, gold briefly dropped by 1.7%, hitting a low of $4,420, and it is now rebounding to just above $4,500. Previously, driven by a wave of bargain-buying, gold rose only slightly last week, temporarily halting the recent downtrend. As the war entered its second month, attacks did not stop over the weekend, heightening the market’s concerns about the conflict becoming prolonged. The market worries that this could lead central banks in various countries to sell gold and curb inflation through interest-rate hikes.

(The gold has kept falling since the outbreak of the Middle East war | Source: Bloomberg)

With the U.S. dollar strengthening, gold has fallen by more than 15% so far this month, marking the largest single-month decline since October 2008. Since February 28, when the U.S. and Israel went to war with Iran, the dollar has already appreciated by more than 2%.

In an email, Ole Hansen of Saxo Bank said that gold and silver “have been under considerable pressure, because the Middle East war has triggered broad macroeconomic shocks across global markets, forcing investors to reassess inflation, interest rates, growth, and liquidity conditions at the same time.”

He said, “Until the macro environment stabilizes and the technical picture shows more favorable signals, investors seem unwilling to reallocate back into long-term hard assets.”

Tensions in the Middle East escalate

Although Pakistan, Egypt, Saudi Arabia, and Türkiye held talks in an attempt to find a way out of the war, Iran attacked aluminum smelters in Bahrain and the UAE, and parts of Tehran experienced power outages after missile strikes. The intervention by Yemen’s Houthi forces has further heightened concerns about Red Sea shipping. Meanwhile, U.S. President Donald Trump said Iran has “met” most of the U.S. requirements for ending the fighting.

Since the outbreak of the war, gold has fallen by more than 15%. Its appeal as a safe-haven asset has weakened significantly. Instead, it has moved more in sync with stock markets and has an inverse relationship with oil prices. On Monday, crude oil rose again, as the conflict’s expansion could further hit the energy market. Previously, the Strait of Hormuz was nearly closed, which has already thrown the energy market into disorder.

Alexandre Carrier, fund manager of DNCA Invest Strategic Resources Fund, said that in the short term, “gold may still be fragile,” due to risks of more central banks selling gold and the pressure caused by investors closing positions.

Central banks sell gold

Over the past few years, central banks around the world have continued to buy large amounts of gold, which has been an important pillar supporting rising gold prices. But in the first two weeks after the outbreak of the war, Türkiye’s central bank went against the trend, selling and replacing about 60 tons of gold, worth more than $8 billion. Many of the countries that accumulated gold are also energy importers, so rising oil prices mean fewer dollars are available to reinvest in gold.

The economic shock brought by soaring energy prices has also intensified market concerns that the Federal Reserve and other central banks will keep interest rates unchanged, or even raise them further. For gold, which does not generate interest, this is a negative.

“The bigger macro backdrop behind the weak performance of (gold) is the major shift in interest-rate expectations… the dollar has already bounced back, and gold’s outlook also depends on interest rates, mainly because people expect policy rates to fall under the leadership of the newly appointed Fed chair, which is unfavorable for gold,” said Nicholas Frappell, global head of markets at ABC Refinery.

Traders currently believe there is little chance the U.S. will cut rates this year, because rising energy prices could push up inflation and limit room for monetary easing. This contrasts with expectations of two rate cuts prior to the start of the conflict.

“Last week’s gold price action indicates a reaction to oversold conditions, and it may also reverse the recent downtrend. However, this needs this week’s price action to confirm. Given how quickly headline news moves, volatility is likely and easy,” Frappell said.

On the technical front, FXStreet judges gold to be bearish in the near term. It noted that the price is still below the 100-day moving average of about $4,633; although it is temporarily holding above $4,400, the bears still have the upper hand. The RSI is 34.76, below 50 and not yet in the oversold zone, indicating that downside momentum is present but not fully released. In addition, the death cross between the 21-day and 50-day moving averages was confirmed on March 25, further strengthening the bearish signal

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责任编辑：朱赫楠