Temporary Easing of Middle East Tensions Leads to Gold and Oil Price Corrections

Investor concerns about the Middle East conflict eased, prompting them to reduce safe-haven trades and favor riskier assets such as stocks.

As a result, the gold price fell by 2.72%, marking the largest single-day drop in nearly two years. The partial premium brought about by the Middle East conflict continues to dissipate from the market, putting pressure on oil prices to decline.

Gold >>

On Monday, investor concerns about the Middle East conflict eased, prompting them to reduce safe-haven trades and favor riskier assets such as stocks. Spot gold continued to decline, with the lowest point in the U.S. session hitting USD 2324.89 per ounce, down more than USD 60 from the daily high.

Gold prices experienced the largest single-day drop in nearly two years, ultimately closing down 2.72% at USD 2327.43 per ounce. Although both Israel and Iran launched attacks, which initially sparked concerns of a full-scale war in the region, Iran downplayed the impact and significance of Israel’s recent attacks.

Additionally, traders are focusing on U.S. economic data. The U.S. is scheduled to release the Personal Consumption Expenditures (PCE) Price Index on Friday, with the March PCE Price Index expected to increase from 2.5% in February to 2.6% year-on-year.

This would support reasons for Federal Reserve policymakers to postpone interest rate cuts, which typically puts pressure on gold. Yesterday, gold’s technical outlook showed a gap down in early Asian trading, suppressing prices below USD 2390, leading to a unilateral downward trend.

Prices continued to decline weakly in the Asian, European, and U.S. sessions, with the U.S. session particularly pressured below the USD 2363 level, accelerating the downward trend. Eventually, gold prices broke through the USD 2330 level and closed weakly near USD 2325.

Technical Analysis:

Today’s short-term strategy for gold suggests prioritizing short positions during rebounds, with long positions considered as a secondary approach during pullbacks.

  • Key resistance levels to watch in the short term are around 2345-2350.
  • Key support levels to watch in the short term are around 2317-2312.

WTI Crude Oil >>  

On Monday, partially due to the continued dissipation of the premium brought about by the Middle East conflict, oil prices came under pressure and declined. WTI crude oil futures closed down USD 0.29, or 0.35%, at USD 82.85 per barrel, with the intraday low touching USD 80.70 per barrel, the lowest since March 27.

Brent crude oil futures settled at USD 87.00 per barrel on Monday, down USD 0.29, or 0.33%. Inflation has once again become a focus, as remarks from Federal Reserve officials and a series of inflation data higher than expected last week led to a downward adjustment in rate-cut expectations.

This implies that the Fed will maintain high interest rates for a longer period, which is unfavorable for the outlook of oil demand. Yesterday, oil prices technically showed wide-ranging consolidation at low levels, with downward movements weakening as they retreated below the USD 82 mark during the Asian and European sessions.

In the afternoon, prices further declined, breaking below the USD 81 integer level and stabilizing around USD 80.7 before rebounding. During the late U.S. session, prices retested support around the USD 80.8 level before closing with oscillations.

Technical Analysis:

Today’s crude oil trading strategy suggests prioritizing short positions during rebounds, with long positions considered as a secondary approach during pullbacks

  • Key resistance levels to monitor in the short term are around 83.5-84.0.
  • Key support levels to monitor in the short term are around 81.0-80.5.

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