The turning point has arrived: Will gold completely break below the 5000 mark?! Beware of the Fed's hawkish bombshell today

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On Wednesday (March 18), international gold prices traded within a narrow range, currently around $5,000. Investors are weighing the Federal Reserve’s interest rate cut path against inflation risks from Middle East conflicts.

Spot gold hovered near $5,000 during early trading, nearly unchanged from the previous day’s close. The market widely expects the Fed to keep rates steady at Wednesday’s policy meeting, but investors will closely watch how the U.S. central bank views rising energy prices and a softening labor market. Meanwhile, oil prices remain strong entering the third week of conflict.

(Gold consolidating sideways Source: Bloomberg)

Gold has declined over the past four trading days, and today’s performance isn’t optimistic, with prices continuing to fluctuate near the $5,000 level. Gold has now fallen for three consecutive weeks, despite a slight rebound.

Will gold end this decline and regain upward momentum, or will it experience a deeper correction first? Caution remains about gold’s outlook, mainly due to the sharp rise in crude oil prices and their impact on inflation and interest rates, similar to other market assessments.

Gold at a Turning Point

After difficult weeks, gold is now at a critical psychological level, with the next move potentially decisive. Earlier this week, gold continued last week’s nearly 3% decline, remaining under pressure and briefly falling below the key $5,000 level. Although there was a slight rebound afterward, overall momentum remains weak. However, this isn’t purely a bearish story.

On one hand, rising oil prices are intensifying inflation concerns. Recently, disruptions in the Strait of Hormuz pushed crude oil above $100 per barrel, triggering chain reactions in global financial markets. Although oil prices have pulled back slightly, they remain high.

In recent trading days, bond yields have eased slightly but remain elevated, as investors have had to lower expectations for rate cuts, which has also supported a strong dollar. This combination is generally unfavorable for gold. As a non-interest-bearing asset, rising rates increase the opportunity cost of holding gold, which has been the case over the past few weeks.

Ahead of the Fed’s rate decision later today, gold prices edged lower in early trading. While markets broadly expect rates to stay unchanged, Abdelaziz Albogdady of FXEM noted in an email, “Any hawkish signals indicating policy will remain on hold longer could push up U.S. Treasury yields and the dollar, adding pressure on non-yielding assets like gold.”

He also added, “The market currently expects only one rate cut from the Fed later this year, but economic forecasts and officials’ statements could influence expectations for future monetary policy.”

Geopolitical Tensions Remain High

Meanwhile, geopolitical tensions persist, maintaining safe-haven demand. The U.S. and Israel continued attacks overnight, with Iran confirming that National Security Chief Ali Larijani was killed—initially reported as an airstrike. Tehran continues strikes on energy infrastructure across several Gulf countries, and shipping through the Strait of Hormuz is nearly halted.

Tight energy supplies and rising oil prices have heightened inflation fears and dampened expectations for rate cuts by the Fed and other central banks. Higher borrowing costs generally pressure precious metals, which do not pay interest.

Despite this, gold’s upward momentum has stalled, but the metal has still gained about 16% this year, supported by geopolitical risks and concerns over the Fed’s independence. Longer-term worries about stagflation—slowing growth combined with high inflation—may continue to favor gold, as investors seek alternative stores of value.

Meanwhile, central banks worldwide continue to increase gold holdings. Even with yields high, gold has not plummeted but has only eased gradually. Interestingly, stock markets seem to be pricing in a quick easing of Middle East tensions.

After Trump’s speech on Monday, markets cautiously optimistic that the ongoing oil supply disruptions may not last as long as previously feared. However, if the conflict persists, the U.S. and Israel might have to continue unilateral actions, as other NATO members have decided not to join the conflict. This could benefit Iran in maintaining a longer blockade of the Strait of Hormuz.

If oil prices and bond yields decline, gold could quickly stabilize. But current risks in risk assets remain skewed to the downside, suggesting further short-term declines for gold. If oil stays high and central banks adopt a more hawkish stance, gold’s outlook could face continued pressure.

Thus, gold is caught between two strong forces: safe-haven demand supporting prices and macro headwinds from rising dollar and yields.

Technical Analysis of Gold: Will it Break Below $5,000?

Gold is currently trading near a key level of $5,000. This psychological threshold has been tested multiple times, with buyers consistently stepping in around this level over the past week or so.

(Source: TradingView, Forex.com)

However, downward pressure is building. A close below $5,000 on the daily chart would be significant—likely confirming a short-term break and opening further downside space. If that occurs, key support levels to watch are $4,900, then the recent low of $4,841, and below that, a trendline support around $4,700.

On the upside, previous support at $5,055 and $5,150 may now act as resistance. Additionally, a descending wedge pattern may be forming on the chart, with prices consolidating within a narrowing range. Ultimately, gold will need to break out of this consolidation. A breakout upward could trigger technical buy signals, pushing prices toward $5,200 and potentially higher over time.

But before a true breakout, the market remains event-driven and reactive rather than trending, so caution is advised.

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Editor: Zhu Henan