Gold Price Oscillates Amid Multiple Games: Interplay of Middle East Situation, Energy Inflation, and Fed Policy

Introduction

The international gold market extended its short-term bullish tone during the Asian session on Monday (July 22), with gold prices briefly hitting a two-week high near $4141.59/oz, approaching the 200-period moving average on the 4-hour chart, before slightly retreating to around $4130/oz. The market is currently in a delicate balance: on one hand, diplomatic engagement between the US and Iran brings hope for cooling energy prices while easing market concerns about the Fed's hawkish stance, providing support for gold's rebound; on the other hand, persistent geopolitical frictions and high rate hike expectations make gold bulls cautious. The dollar index paused after four consecutive days of strengthening, giving gold some breathing room. The core contradiction lies in investors weighing the possibility of the Fed maintaining a tightening stance to curb energy-driven inflation against the geopolitical risk premium from US-Iran uncertainty.

1. Diplomatic Engagement Parallels Military Strikes: Middle East Situation Grips Global Nerves

Negotiation Window Seems to Open, Military Pressure Simultaneously Escalates

US Secretary of State Marco Rubio stated on Sunday that Washington remains open to talks with Tehran, a signal initially interpreted by the market as a ray of hope for de-escalation. Meanwhile, Iranian Interior Minister Eskandar Momeni visited mediating country Pakistan, asking Islamabad to continue its mediation role, suggesting diplomatic channels are not yet completely closed.

However, beneath the facade of peace, the intensity of military confrontation has not diminished but increased. The US military confirmed that early Wednesday it had completed the 11th round of nighttime strikes against targets inside Iran, focusing on destroying aircraft hangars and drone storage facilities. Iran, in turn, intensified harassment of US assets in the Gulf, expanding its target scope to military outposts in Bahrain, Kuwait, and Jordan. Further tightening energy market nerves, Iranian forces attacked two oil tankers attempting to transit the Strait of Hormuz, while Yemen's Houthi rebels announced a maritime blockade against Saudi Arabia, with conflicts spreading to multiple points.

2. Energy Inflation Cloud Looms: Fed Rate Hike Expectations Heat Up

Oil Prices Surge to Monthly High, Rate Hike Probability Climbs to 88%

The transit risk at the Strait of Hormuz, a global energy choke point, directly pushed crude oil prices to their highest level since June 12. Soaring energy costs are re-igniting market anxiety over imported inflation, which may force the Fed to stick to its hawkish monetary policy stance as price pressures re-emerge.

The CME Group's FedWatch tool shows that traders now see an 88% probability of at least one more rate hike by the Fed before year-end. This expectation has significantly boosted US Treasury yields, increasing the opportunity cost of holding non-yielding gold, thereby limiting upside potential for gold prices.

OCBC Bank analysts point out that under current macro conditions, gold is more likely to exhibit a "two-way oscillation" pattern, with any rebound meeting stubborn resistance. They believe that for gold to achieve a more sustained recovery, three prerequisites must be met: a significant drop in oil prices, a moderate decline in real yields, and a cooling of Fed tightening expectations. Until then, gold's upside potential will remain constrained.

3. Technical Analysis: $4100 Level Becomes Short-Term Bull-Bear Watershed

Gold Technical Analysis: 200-Period MA Poses Key Test

Observing the 4-hour chart technical pattern, if gold can effectively break above the 38.2% Fibonacci retracement level of the downtrend since mid-June (corresponding to the $4120 round level) during the day, the short-term bullish signal will further strengthen. Current momentum indicators are solid, with the 14-day Relative Strength Index (RSI) rising to near 72, approaching overbought territory; the Moving Average Convergence Divergence (MACD) remains in positive territory above the zero line, indicating buying momentum has not yet exhausted.

However, bulls need to remain cautious, as a more sustainable upside structure requires gold to consistently close above the 200-period simple moving average (currently around $4138) on the 4-hour chart. On the upside targets, if gold successfully breaks above the 200-period SMA resistance, the next target will aim at the 50.0% Fibonacci retracement ($4170), then challenge the 61.8% retracement ($4220). On a larger scale, the 78.6% Fibonacci level ($4282) and the previous cycle high of $4382 constitute the intermediate-term bullish final target zone.

On the downside risk, near-term support levels are sequentially the $4100 mark, the 38.2% retracement ($4120), and the 23.6% Fibonacci level ($4059). If these supports are lost, gold may retest the $4000 support, or even accelerate downward to the structural low near $3943.

Conclusion

The current gold market is amidst a game of multiple forces. The evolution of the Middle East situation, energy price trends, and Fed monetary policy expectations are intertwined, jointly shaping gold's short-term fluctuations. In the short term, the bullish-bearish battle near the $4100 level will persist, with a breakout of the 200-period MA (around $4138) serving as a key signal. From a medium-term perspective, investors need to closely monitor the progress of US-Iran diplomatic negotiations, the safety of navigation through the Strait of Hormuz, and remarks from Fed officials in the coming weeks. Before the picture becomes clearer, gold is more likely to maintain a range-bound pattern, with any directional breakout requiring further confirmation from fundamentals. For market participants, maintaining flexible strategies and strict risk management in a highly uncertain environment will be key to navigating the current complex situation.