12.05.202609:13 Forex Analysis & Reviews: Gold Reacts Again to Middle Eastern News

Gold prices sharply declined today during Asian trading hours after a modest two-day rise, as traders grew seriously concerned about the impasse in the Middle Eastern conflict.

The price of gold for immediate delivery approached $4,696 per ounce, offsetting earlier gains. On Monday, President Donald Trump mocked Iran's response to the US peace proposal, stating that the fragile ceasefire in the Strait of Hormuz is on "life support" and does not promise a quick resolution to the conflict. These harsh remarks came amid ongoing tensions in the Persian Gulf, where Iran continues to exert pressure on international shipping routes, particularly through the Strait of Hormuz.

Trump, known for his blunt communication style, did not miss the chance to criticize the Iranian side, calling their response "ridiculous" and "unserious." He emphasized that despite the US's proposed de-escalation measures, Iran is not showing the necessary willingness for peace. This statement from the US President only exacerbated fears of geopolitical instability in the region, which directly impacts global energy prices.

For gold, these comments provided a basis for the sharp decline, reigniting discussions of rising energy prices and inflation that could lead to interest rate hikes, further pressuring gold.

It is clear that this year has been very volatile for gold: at the end of January, it reached a record high, only to partially retrace some of those gains. The precious metal has been struggling since the start of the war in the Middle East. As mentioned earlier, high oil prices have heightened concerns that central banks may maintain or even increase interest rates to curb inflationary consequences. This could become a hindrance for gold, as it does not generate interest.

The price dynamics of gold confirm that it is trading not merely as a simple safe-haven asset but more as an indicator of macroeconomic risks, caught between the oil market/inflation, the Federal Reserve's pricing dynamics, the US dollar movement, and investor sentiment.

The price of silver remained virtually unchanged after rising more than 7% on Monday amid reports of a liquidity crisis at Peru's state oil company. Peru is one of the largest producers of silver.

As for the current technical picture of gold, buyers need to reclaim the nearest resistance at $4,708. This will allow them to target $4,771, above which it will be quite challenging to break through. The further target will be around $4,835. In the event of a decline in gold, bears will attempt to take control of $4,656. If they succeed, a breakout of the range will deliver a severe blow to bullish positions and push gold down to a low of $4,607, with the potential to reach $4,546.