- Gold prices surge after US President Trump suspends Operation Freedom, an initiative to escort commercial ships across the Strait of Hormuz.
Gold prices surged heavily this Wednesday, after a move by US President Donald Trump that appeared to calm ongoing Middle East tensions. The announcement to suspend Operation Freedom a day after it began in the Strait of Hormuz, led to an overnight surge in the price of gold by nearly $120, in the single biggest intraday upside move since 31 March’s $158.79 (3.52%) price surge.
Gold prices are up 2.67% as of writing, and is trading at $4677 an ounce.
Gold Price Today: Fundamental Drivers
The move comes as US President Trump announced a temporary pause in Operation Freedom, a U.S.-led initiative to provide safe passage for commercial ships trying to cross the blockaded Strait of Hormuz. The markets have interpreted this as a de-escalatory move, which has led to an uptick in gold prices.
Gold has been trading in a two-way pattern for much of the war’s duration, as its playbook is not only restricted to its safe-haven asset status. Gold is now trading within the context of the inflationary fears and potential central bank hawkish moves in response to the rise in oil prices that the geopolitical tensions have brought. As it is, gold futures are now trading in direct response to the war/Hormuz headlines as the impact oil prices.
The latest inverse move to the direction of the geopolitical headlines is a clear example of this relationship. Gold prices had fallen sharply after the Fed left interest rates unchanged and used language in its statement suggesting it was now taking a hard look at inflationary pressures, with a view to tweaking monetary policy in response. The hawkish hold was USD-positive, sending gold prices tumbling. The de-escalatory headline of the day has allowed gold prices to recover much of the lost ground, confirming the two-way nature of its price movements in response to war headlines and oil prices.
Analysts widely believe that upward price movements in the non-yielding yellow metal will continue to be driven by any de-escalatory moves and hopes of a cease-fire in the Middle East. Market pricing/re-pricing of the Fed’s interest rate pathway in response to high energy prices and their impact on global growth remains a growing concern.
Gold Price: Weekly forecast scenarios
Base case: The choppy consolidation continues. Despite the intraday surge, the D1 chart shows the price is still consolidating between $4500 and $4845. The wide range of price action gives room for sharp moves on both sides.
Bull case: A clear upside push that takes the price above $4845 and into the $5000s will follow a ceasefire or a permanent solution that ends the war and brings oil prices below $90 sustainably. This scenario favors lower US bond yields and a softer dollar, as it brings back Fed rate-cut expectations.
Bear case: A significant deterioration in the war headlines will keep oil prices high and keep inflationary fears on the front burner. It will reinforce “higher-for-longer” interest rate narratives, leading to firmer US bond yields and a stronger dollar. The keyword here is “significant deterioration.”
Gold Price: Technical Outlook
The double bottom strike on the 4508 support has seen the pattern confirmed by the break of the neckline at 4661. The measured move for the pattern’s completion is expected at the 4840 resistance level. However, the price must break past the intraday resistance zone between 4702 and 4730 for this move to aim for completion.
On the flip side, failing to break the intraday resistance zone leads to a pullback targeting the 4661 neckline support. If this support yields to bearish pressure, the 4600 psychological price mark and the prior high of 24 March become the next downside target.
