Powell reignites rate cut bets! Gold surges strongly back to 4500, while Trump issues a fierce warning to destroy Iran's energy assets

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On Tuesday (March 31), gold rose for a second consecutive day. Buying on dips provided support for prices, while the market awaited clearer signals on how long the Middle East conflict will continue.

Gold surged as much as 1.9%, reclaiming above $4,500, before giving back part of its gains. Even as oil prices continued to rise, gold still showed resilience. With inflation concerns weighing on gold prices, investors stepped in to buy as prices pulled back.

However, after Federal Reserve Chair Jerome Powell said long-term inflation expectations appear to remain under control, traders on Monday increased their bets that the Fed will cut interest rates again, easing concerns that oil price gains would prompt a shift toward tighter monetary policy. Rising interest rates are typically unfavorable for non-yielding gold.

On Monday, U.S. President Donald Trump once again threatened that if the Strait of Hormuz cannot quickly restore navigation, the U.S. will destroy Iran’s energy assets. With more U.S. forces arriving in the region, the market fears the war could escalate further. Over the weekend, Iran-backed Houthi forces entered the conflict, releasing signals that the situation may be escalating.

Meanwhile, Pakistan, Egypt, Saudi Arabia, and Turkey held talks in an attempt to find a path to end the war; but Iran attacked aluminum smelters in Bahrain and the UAE, and after Israeli missile strikes, parts of Tehran also experienced power outages.

These developments have heightened concerns in the market about the conflict becoming prolonged, with fears that the resulting inflation will force central banks to raise rates. On top of that, broader financial markets have seen liquidity tightness. Since the war broke out in late February, gold prices have fallen 15%. Last week, gold’s pullback pushed several technical indicators into oversold ranges, after which gold stabilized and ended the prior three-week streak of declines.

However, expectations for rate hikes may be constrained by the risk of a sharp economic slowdown, especially against an economy that is already weak. Some large fund managers on Wall Street said that financial markets have underestimated the risk of economic downside, which could ultimately drive U.S. Treasury yields lower. In that case, the opportunity cost of holding gold would decrease, increasing gold’s appeal.

Bloomberg Markets Live macro strategist Tatiana Darie said: “As gold attracts buying on dips, based on historical experience, when key participants such as ETFs show signs of capitulation-style selling, it often signals subsequent upward moves. But for now, market confidence in gold is still only tentative.”

In recent years, central banks around the world have continued to buy gold, which has been an important pillar supporting gold prices higher. However, more than two weeks after the outbreak of the war, the Turkish central bank moved against the trend, selling and replacing about 60 tons of gold worth more than $8 billion.

Heraeus Precious Metals trader Marc Loeffert wrote in a report: “Although price volatility in the very short term may still be influenced by statements from U.S. diplomatic policy, after gold surged in January to record highs, gold is now in a consolidation phase, and the near-term outlook still appears bearish.”

Gold Technical Analysis

In this corrective rebound since the March low, gold pushed up to the 38.2% retracement level before encountering selling. Today, the price action is running between the 100-hour and 200-hour moving averages on the 1-hour chart.

From the daily chart, after gold made a record high at the end of January, it saw a sharp pullback. Selling at one point drove gold down to a low near $4,395 in early February, before a strong rebound lifted it, and on March 2 it rose to a high of $5,416. However, despite ongoing geopolitical tensions, including the Iran war, gold’s trend has remained relatively weak since then, and on March 23 it fell further to a low of $4,098.27.

(Chart Source: tradingview)

This low is technically significant. Gold tested and held support near the 200-day moving average during its uptrend, and it also received buy-side support before the 38.2% retracement level of a larger rally—i.e., the move from the September 2022 low to the January high—located around $4,078. These two levels form a confluence, creating a solid base, with buyers relying on this support to push gold higher again.

Looking at the lower 1-hour chart, since March the price action has more often reflected range-bound movement rather than a one-way trend. After bouncing off the March low, gold climbed to around the 38.2% retracement level of the most recent down move, after which sellers re-entered, limiting upside space. The price then fell again and found support, before rising once more, but overall momentum remains constrained.

(Chart Source: tradingview)

The latest rebound has been capped by the 200-hour moving average in a downtrend. Buyers today attempted to push prices above this level, but failed to hold it. Over the past several hours, the market has entered a narrower consolidation range, with price running between the 100-hour moving average below at $4,484 and the 200-hour moving average above at $4,545.

This creates a clear tug-of-war zone for the short term. The 100-hour and 200-hour moving averages currently respectively act as levels defining directional preference and risk. If the price falls below the $4,484 100-hour moving average, the market would be more inclined to turn downward again and could trigger a new round of sell pressure. Conversely, if the price continues to break upward above the $4,545 200-hour moving average, buyers would gain more initiative and open space for further corrective upside.

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Responsible editor: Zhu Hunan