Since the onset of the Israel-US conflict with Iran, have exhibited significant volatility. Now in its sixth day, the conflict continues to disrupt shipping through the Strait of Hormuz, restricting critical Middle Eastern oil and gas flows.
Trump has pledged to provide insurance and naval escorts for ships to help contain soaring costs, as oil prices rose on Thursday. At least 200 vessels remain anchored off the coast, according to Reuters estimates.
Gold futures have shown unexpected weakness due to the fading war premium. Recent selling reflects investors raising cash during market stress. This is not necessarily a fundamental shift in sentiment. The strong U.S. dollar has become a key headwind for precious metals. Geopolitical uncertainty typically supports demand for gold.
But the demand dynamics have changed since the beginning of tension between the U.S. and Iran as the U.S. President Donald Trump continued to threaten Iran with dire consequences if they don’t stop their nuclear enrichment program, while last year, in June, President Trump himself proclaimed that his air strikes have completely destroyed Iranian Uranium facilities.
Now, the question arises that if he had completely paralyzed Iran’s nuclear facilities, what justification would he provide for his recent attacks on Iran this year? Is his aim only to support Israel’s long-standing wish to destroy Iran completely, while he himself claims to establish global peace through the “Board of Peace”?
Undoubtedly, several forces are currently influencing gold prices simultaneously. These include expectations around Federal Reserve interest-rate cuts, currency movements, geopolitical risk, and market liquidity conditions.
I find that if this conflict proves to be prolonged, it has obvious potential to affect global energy prices, market sentiments, growth, and inflation, which would place a new challenge for policy-makers everywhere in the world.
I find that the surging bearish pressure on gold futures could experience a sharp sell-off due to liquidity crunch on sudden increase in energy prices, which will result in a sharp slide in gold and futures, as both are only trying to defend the key support levels.
However, the spot gold and silver ratio () looks evident enough to bounce sharply upward, as it is holding above the significant support at 61.27, and could enter the decisive zone above 66.33 shortly.
Undoubtedly, this could result in a sharp sell-off in gold and silver futures before this weekend due to the inverse correlation between the spot gold-silver ratio and gold and silver futures.
Disclaimer: Readers are advised to take any position in gold and silver at their own risk, as this analysis is based only on observations.
