Gold Slips as Central Banks Walk a Tightrope on Inflation and Growth | Investing.com

Upon evaluating across various time chart patterns, I observed that this week’s decline has heightened anxiety among global central banks. These institutions have adopted a hawkish tone since the U.S.-Israel conflict with Iran sharply increased energy prices, yet they acknowledge that significant uncertainty regarding the global economic impact necessitates caution in their forthcoming policy decisions.

After only recently containing a commodities-driven inflation spike following Russia’s full-scale invasion of Ukraine in 2022, policymakers remain committed to controlling new price pressures while seeking to avoid undermining fragile economic growth.

The U.S. Federal Reserve and the Bank of Canada both opted to hold interest rates steady on Wednesday, as did the Bank of Japan on Thursday. Yet they made clear they are on alert, wary that rising energy prices could spark a fresh wave of inflation.

Yet Powell’s reluctance to say that risks of a weakening job market posed a greater risk to the Fed’s objectives than inflation helped push market rate-cut expectations into 2027.

While Bank of Japan Governor Kazuo Ueda said the BOJ would not rule out a near-term rate hike if the expected hit to growth from surging oil costs proves temporary, and does not derail progress in durably hitting the bank’s price target.

Bank of Canada Governor Tiff Macklem struck a similar note: “If energy prices stay high, we will not let their effects broaden and become persistent inflation,” he said.

Earlier this week, the Reserve Bank of Australia hiked rates to a 10-month high and warned of a “material” risk to inflation from the oil price spike.

Even Brazil’s central bank, with one of the highest rates of all major economies, opted for a cautious 25-basis-point cut to a benchmark 14.75% rate – a smaller cut than initially expected.

On Thursday, both the Swiss National Bank and Sweden’s Riksbank kept policy rates on hold, flagging the uncertainty of how the war will end up impacting the economy.

Next up are the Bank of England and the European Central Bank – due to announce their decisions at 1200 GMT and 1315 GMT respectively. Both are expected to hold, but market attention will focus on the communication around those decisions.

I anticipate that the rate path will remain bumpy with no clear end in sight to the conflict that could upend global supply chains, jolt financial markets, and hurt corporate sentiment.

This latest escalation feels like a turning point for markets because the conflict is no longer just about military headlines or Strait of Hormuz closure.

Now, it is now hitting the plumbing of the global energy system. What is unsettling markets now is the growing stagflation risk. It means this is no longer just a geopolitical story but a macro one.

Undoubtedly, such a prevailing situation has elevated panic among the gold bugs as it has already lost its safe haven potential a long time back while trading near the record peak levels.

Now, gold has also lost its war premium since the advent of a steep fall after testing the second record peak on March 2, 2026, at $5,435.42.

Since then, gold futures have been following a 50-degree angle of depression up to Wednesday, and now this angle has narrowed to an 85-degree angle of depression. And if this fall maintains such steepness, gold futures could test the significant support at the 200 EMA ($4,080) before this weekly close.

I pointed out the advent of this fall in my last analysis (https://www.investing.com/analysis/gold-downtrend-deepens-as-oil-pullback-and-policy-uncertainty-grow-200676840) this Wednesday, while the gold futures were hanging at $4,994 since the opening of this week.

Now, U.S. Defence Secretary Pete Hegseth said Washington will hit Iran with its “largest strike package yet” on Thursday, adding that Iran’s missile strikes have fallen by 90% since the start of the joint U.S.-Israeli assault on the country roughly three weeks ago.

Speaking at a press conference, Hegseth said Iran’s 11 submarines in service before the war have been eliminated, while Iran’s military ports are “crippled.”

The comments come as escalating attacks on critical energy infrastructure across the Middle East are driving a sharp surge in oil and gas prices, putting markets worried about a widening supply shock on edge.

In a weekly chart, I find that the gold futures are trading below the 20 EMA ($4,639), and could test the next support at the 50 EMA ($4,070) where a breakdown could accelerate the selling spree to test the next significant supports at the 100 EMA ($3,498) and the 200 EMA ($2,860) if this war escalate for next few weeks.

I conclude that though the U.S. President Trump seems to be dragged in such a long war by the Israeli Prime Minister Nitanyahu who suggested Trump to make the deal more hard while President Trump was aiming only to stop nuclear enrichment program by Iran, and the peace deal was near its completion when Israel started bombing Iran and killed Iran’s Supreme Leader, Ali Khamenei on Feb.28, 2026.

Now, nobody knows when this war will end and how much more economic damage it will do to the countries that are not even involved in this war.

I discussed the genesis of this war a long time back, explaining how the future direction of gold prices is closely tied to the inverse correlation between the ‘Golden Dome’ and the Israeli and American ‘Iron Domes’ in my previous analysis (https://www.investing.com/analysis/gold-holds-firm-despite-dollar-strength-and-geopolitical-risk-200676019) on Mar.4, 2026.

Disclaimer: Readers are advised to take any position in gold at their own risk, as this analysis is based only on observations.