OEXN: If the Conflict Prolongs, Gold Price May Face Pullback Pressure

On March 17, despite international oil prices remaining high over the past two weeks, their impact on the long-term futures market has not yet fully manifested. OEXN believes that the current market focus is on the duration of the geopolitical situation. If the related conflict is delayed until after mid-April, the resulting chain reactions will significantly affect government bond yields, stock markets, and precious metals, potentially causing substantial disruptions to the global macroeconomy.

From an asset correlation perspective, recent market trends show rising yields and pressure on equities, while precious metals have not demonstrated the expected safe-haven properties. Instead, they have maintained a high positive correlation with equities. Over the past three years, gold and stocks have often risen together, but currently investors are experiencing concentrated position unwinding. Data shows that gold prices are mainly fluctuating between $5,000 and $5,200, unable to break through previous highs, while silver has fallen back to around $85. OEXN states that this “follows the market down but not up” characteristic indicates that, in the absence of extreme safe-haven buying, metals are more like liquidity assets that fluctuate with the broader market.

Regarding concerns that selling U.S. Treasuries to cope with rising energy costs might occur, OEXN believes that panic has not yet set in. Although crude oil prices spiked temporarily, historical data shows that before the conflict erupted, oil prices were only in the $60 to $70 range. Currently, there is a clear spot premium, with near-month contracts around $96 and September futures around $82. Only if oil prices stay above $90 for more than a month might emerging markets be forced to reduce dollar holdings to ease energy pressures; this turning point has not yet arrived.

In the context of long-term oversupply in energy markets, the war premium has disrupted the original balance, but this imbalance will eventually correct itself over time. OEXN notes that many investors still hold large long positions in gold and silver. In the face of stock market volatility and uncertainty, these positions may loosen, potentially causing gold prices to short-term dip below $5,000.

In summary, precious metals are unlikely to escape the current trend of declining alongside stocks in the short term. OEXN suggests that for investors who are firmly bullish on gold, now may not be the best entry point. It is advisable to watch for support levels after price retracements. Once market sentiment is fully released, gold prices, after months of consolidation, are expected to usher in a new trend of upward movement.