Spot gold erased early gains on Tuesday, plunging over 1% to a two-week low as hopes for a lasting ceasefire between Israel and Iran undercut bullion’s appeal as a safe-haven asset. In Asian trade, spot prices sank to $3,318.60 per ounce before rebounding modestly to hover near $3,326.33 by mid-morning GMT, while U.S. gold futures slid to $3,340.20. Investors rushed back into riskier equity and energy markets, betting that a cooling of Middle East hostilities would steady crude supplies and dent gold’s traditional support.
Safe-Haven Exodus Sparks Sharp Pullback
The president’s surprise announcement of an Israel-Iran ceasefire dramatically shifted market sentiment. Major Asian equity indices rallied, with benchmarks in Hong Kong and Seoul jumping more than 2%, as traders anticipated a thaw in regional tensions. Oil prices, which had spiked on fears of disruption to Gulf supplies, retreated sharply—robbing gold of one of its key underpinnings. With geopolitical fears receding, portfolio managers unwound long gold positions, causing spot prices to breach technical support at the 20-day moving average and sparking a wave of selling.
Complicating the picture, U.S. central-bank commentary injected mixed signals into the market. Federal Reserve officials, while still cautious on near-term rate cuts, have signaled that easing may be on the horizon, a prospect that normally bolsters gold. Yet this week, traders focused on the risk-on shift from the Middle East ceasefire, sidelining rate-cut expectations. Markets currently price in roughly 50–60 basis points of Fed rate reductions by year-end, but that dovish outlook failed to stem gold’s slide as liquidity chased higher-yielding assets and equities.
Analysts warn that any relief rally in risk assets may prove fleeting if the ceasefire unravels. Both Israel and Iran maintain decentralized military structures—making enforcement of a bilateral truce inherently fragile. Hard-line elements on each side have already threatened retaliatory strikes in response to perceived violations. Without a clear monitoring mechanism or neutral observers, even minor skirmishes could reignite broader hostilities, sending investors scrambling back into safe havens and potentially driving gold above recent highs.
Technical Indicators Highlight Bearish Momentum
From a chart-analysis perspective, gold’s break below its short-term exponential moving average confirmed a shift in trend. The relative strength index dipped below the neutral midpoint, signaling growing selling pressure. Open interest data in U.S. futures suggested that a significant portion of the recent selling was not new bearish bets but rather long-position liquidations, as traders rushed to lock in profits ahead of further market moves. Technical strategists note that the next support level lies near $3,300 per ounce, with any breach opening the door to tests of the $3,200 mark.
In India, where gold is a key retail and cultural investment, local prices also reflected the global rout. Mumbai bullion markets saw spot rates fall by approximately ₹1,700 per 10 grams, while futures on the Multi Commodity Exchange tumbled to near ₹96,400. A slight depreciation of the rupee against the dollar amplified the correction, as import costs temporarily rose. Traders on the MCX pointed to bearish crossover signals in moving averages, advising clients to “sell on rallies” until clearer bullish catalysts emerge.
Energy Market Ripples Reinforce Price Shifts
Crude oil’s plunge following the ceasefire news reinforced the narrative that easing conflict risk would weigh on gold. Brent futures fell by over 5% in a single session, as traders anticipated uninterrupted flows through the Strait of Hormuz. Lower oil prices not only dampened inflation expectations—another key support for non-yielding bullion—but also shifted portfolio allocations toward cyclical sectors expected to benefit from cheaper energy inputs.
Despite the risk-on enthusiasm, many in the market remain wary. Past ceasefires between Israel and Iran have collapsed amid mutual distrust and proxy conflicts, leading to renewed spikes in safe-haven demand. Should the truce falter, gold is poised for a swift rebound, potentially reclaiming the $3,500 level as geopolitical risk premiums return. Commodity strategists advise clients to maintain hedges for sudden volatility, noting that a breakdown could coincide with renewed tanker insurance costs and supply-disruption fears.
Looking Ahead: Policy and Politics in Play
Beyond Middle East developments, attention is also turning toward upcoming U.S. economic data and Fed-chair testimony. Any indication that the Fed may delay or scale back rate cuts could provide fresh support for gold, offsetting some of the downward pressure from easing geopolitical tensions. Conversely, strong data could push real yields higher, further depressing bullion. With central-bank policy and regional politics now intertwined in driving gold’s near-term path, traders are bracing for choppy trading and rapid sentiment shifts.
On the demand side, physical consumption in Asia has so far offered scant support. Chinese buying remained muted even as local prices dipped, with investors waiting on clearer signals of a sustained rally. In the Middle East, jewelers and retail outlets reported only modest upticks in inquiry, constrained by concerns over potential flare-ups. Without a surge in physical demand to counter financial-market selling, gold’s routine retreat in times of easing panic may be amplified.
Three Risks to Watch
As markets absorb the implications of an Israel-Iran ceasefire, gold finds itself at a crossroads—caught between receding geopolitical risk and persistent monetary-policy uncertainty. For now, traders are capitalizing on the momentum toward risk assets, but the metal’s role as a crisis hedge remains intact, poised for a prompt rebound if history is any guide.
(Source:www.livemint.com)
Safe-Haven Exodus Sparks Sharp Pullback
The president’s surprise announcement of an Israel-Iran ceasefire dramatically shifted market sentiment. Major Asian equity indices rallied, with benchmarks in Hong Kong and Seoul jumping more than 2%, as traders anticipated a thaw in regional tensions. Oil prices, which had spiked on fears of disruption to Gulf supplies, retreated sharply—robbing gold of one of its key underpinnings. With geopolitical fears receding, portfolio managers unwound long gold positions, causing spot prices to breach technical support at the 20-day moving average and sparking a wave of selling.
Complicating the picture, U.S. central-bank commentary injected mixed signals into the market. Federal Reserve officials, while still cautious on near-term rate cuts, have signaled that easing may be on the horizon, a prospect that normally bolsters gold. Yet this week, traders focused on the risk-on shift from the Middle East ceasefire, sidelining rate-cut expectations. Markets currently price in roughly 50–60 basis points of Fed rate reductions by year-end, but that dovish outlook failed to stem gold’s slide as liquidity chased higher-yielding assets and equities.
Analysts warn that any relief rally in risk assets may prove fleeting if the ceasefire unravels. Both Israel and Iran maintain decentralized military structures—making enforcement of a bilateral truce inherently fragile. Hard-line elements on each side have already threatened retaliatory strikes in response to perceived violations. Without a clear monitoring mechanism or neutral observers, even minor skirmishes could reignite broader hostilities, sending investors scrambling back into safe havens and potentially driving gold above recent highs.
Technical Indicators Highlight Bearish Momentum
From a chart-analysis perspective, gold’s break below its short-term exponential moving average confirmed a shift in trend. The relative strength index dipped below the neutral midpoint, signaling growing selling pressure. Open interest data in U.S. futures suggested that a significant portion of the recent selling was not new bearish bets but rather long-position liquidations, as traders rushed to lock in profits ahead of further market moves. Technical strategists note that the next support level lies near $3,300 per ounce, with any breach opening the door to tests of the $3,200 mark.
In India, where gold is a key retail and cultural investment, local prices also reflected the global rout. Mumbai bullion markets saw spot rates fall by approximately ₹1,700 per 10 grams, while futures on the Multi Commodity Exchange tumbled to near ₹96,400. A slight depreciation of the rupee against the dollar amplified the correction, as import costs temporarily rose. Traders on the MCX pointed to bearish crossover signals in moving averages, advising clients to “sell on rallies” until clearer bullish catalysts emerge.
Energy Market Ripples Reinforce Price Shifts
Crude oil’s plunge following the ceasefire news reinforced the narrative that easing conflict risk would weigh on gold. Brent futures fell by over 5% in a single session, as traders anticipated uninterrupted flows through the Strait of Hormuz. Lower oil prices not only dampened inflation expectations—another key support for non-yielding bullion—but also shifted portfolio allocations toward cyclical sectors expected to benefit from cheaper energy inputs.
Despite the risk-on enthusiasm, many in the market remain wary. Past ceasefires between Israel and Iran have collapsed amid mutual distrust and proxy conflicts, leading to renewed spikes in safe-haven demand. Should the truce falter, gold is poised for a swift rebound, potentially reclaiming the $3,500 level as geopolitical risk premiums return. Commodity strategists advise clients to maintain hedges for sudden volatility, noting that a breakdown could coincide with renewed tanker insurance costs and supply-disruption fears.
Looking Ahead: Policy and Politics in Play
Beyond Middle East developments, attention is also turning toward upcoming U.S. economic data and Fed-chair testimony. Any indication that the Fed may delay or scale back rate cuts could provide fresh support for gold, offsetting some of the downward pressure from easing geopolitical tensions. Conversely, strong data could push real yields higher, further depressing bullion. With central-bank policy and regional politics now intertwined in driving gold’s near-term path, traders are bracing for choppy trading and rapid sentiment shifts.
On the demand side, physical consumption in Asia has so far offered scant support. Chinese buying remained muted even as local prices dipped, with investors waiting on clearer signals of a sustained rally. In the Middle East, jewelers and retail outlets reported only modest upticks in inquiry, constrained by concerns over potential flare-ups. Without a surge in physical demand to counter financial-market selling, gold’s routine retreat in times of easing panic may be amplified.
Three Risks to Watch
- Ceasefire Breakdown: A return to hostilities could spark a sharp safe-haven bid.
- Central-Bank Divergence: Any hawkish pivot from the Fed would pressure gold further.
- Oil-Price Volatility: Renewed supply fears could reignite both oil and gold rallies.
As markets absorb the implications of an Israel-Iran ceasefire, gold finds itself at a crossroads—caught between receding geopolitical risk and persistent monetary-policy uncertainty. For now, traders are capitalizing on the momentum toward risk assets, but the metal’s role as a crisis hedge remains intact, poised for a prompt rebound if history is any guide.
(Source:www.livemint.com)
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