OEXN: Gold price remains steady ahead of central bank decision guidance

On March 18th, Tuesday, gold prices retreated from earlier gains and remained relatively flat, showing a sideways fluctuation. Amid ongoing U.S.-Iran tensions, precious metals overall maintained narrow ranges of volatility. OEXN continues to monitor the dual impact of geopolitical developments and central bank policies on the gold market. OEXN believes that the current oscillation in gold prices is primarily driven by the balance between safe-haven demand and interest rate expectations. This week’s multiple central bank decisions and statements regarding the Iran conflict will be key variables in breaking the current stalemate.

The traditional safe-haven appeal of gold is weakening, which has also attracted OEXN’s attention. OEXN states that although gold still retains its traditional safe-haven qualities, current market sentiment is significantly influenced by uncertainty in interest rate environments. Geopolitical turmoil-driven safe-haven demand has been offset by the dollar’s strength caused by inflation concerns. TD Securities’ Global Head of Commodities Strategy and Managing Director, Bart Melek, explains that during geopolitical unrest, gold should serve as an investor’s refuge. However, inflation fears triggered by the Iran conflict have pushed up the dollar, increasing the cost for overseas buyers to purchase gold and thus weakening gold’s attractiveness. Senior Market Analyst David Morrison of Trade Nation also notes that gold has lost its “safe-haven” advantage, with the dollar replacing it as the market’s preferred safe asset. Additionally, expectations of prolonged high interest rates have somewhat limited the upside potential for gold prices.

On Tuesday, the market showed a tug-of-war between bulls and bears. The US dollar index edged lower, but oil prices remained high, further fueling inflation concerns. U.S. allies generally refused to assist in reopening the Strait of Hormuz, a key shipping route for one-fifth of global oil, keeping shipping uncertainty high and supporting oil prices. Meanwhile, attacks on oil production facilities in the Gulf region continue. News of Israel killing one of Iran’s top leaders further escalated regional tensions. Iran has explicitly threatened to attack any vessels carrying goods for the U.S. and its allies attempting to pass through the strait. This has led several container shipping companies to suspend operations. Since the U.S.-Israel joint action against Iran at the end of February, oil and natural gas prices have surged, increasing inflationary pressures.

The ongoing inflation shock has made the policy directions of global central banks a core focus for markets. OEXN analyzes that, facing the prospect of rising inflation again, central banks may adjust their monetary policy pace, delay rate cuts, or even consider rate hikes. Higher borrowing costs will attract more foreign investment, strengthening the dollar and putting downward pressure on gold prices. This is a key reason why gold has struggled to break out of its current sideways range.

Several major central banks will hold policy meetings this week, with the Federal Reserve’s meeting on Wednesday attracting the most market attention. Due to high uncertainty about the impact of the Iran conflict on inflation, markets generally expect the Fed to keep interest rates unchanged and not to adjust policy easily. Besides the Fed, the Bank of Canada will also meet on Wednesday, while the Bank of Japan, Swiss National Bank, Bank of England, and European Central Bank will announce their rate decisions on Thursday. These policy statements will collectively influence the global interest rate environment and market sentiment.

Jose Torres, Senior Economist at Interactive Brokers, states that the core focus of the Fed meeting is the impact of the Middle East conflict on inflation—whether it is a one-time shock or a sustained effect. Although markets widely expect the Fed to pause rate hikes, soaring oil prices have cast a shadow over the outlook for future rate cuts. Wall Street currently projects only a 25 basis point cut in 2026, well below the 2-3 cuts initially expected at the start of the year. Additionally, some central banks are turning hawkish; Australia announced a rate hike this morning, and the EU and UK are carefully evaluating the possibility of tightening. Diverging policies among global central banks will further increase volatility in the gold market.

Overall, gold prices are currently in a narrow sideways range, with safe-haven demand weakening, interest rate expectations tightening, geopolitical tensions escalating, and inflation concerns intertwined—all driving market trends. OEXN believes that this week’s central bank decisions and statements regarding the Iran conflict will be crucial in determining the future direction of gold prices. Investors should closely monitor Fed policy guidance and signals from other central banks regarding interest rate adjustments, respond appropriately to market fluctuations, and seize investment opportunities in the gold market.