Trump's national address not only failed to provide a solution for the situation in the Middle East but also signaled an imminent 'powerful strike.' This statement directly ignited the crude oil market, leading to a sell-off in gold and silver...
Following the highly anticipated national address by U.S. President Trump, gold prices fell as he did not provide a clear path to resolving the Middle East conflict.
Following Trump's statement that the month-long conflict is 'nearing its end,' but that the U.S. will deliver an 'extremely powerful blow' to Iran in the next two to three weeks, $XAU/USD (XAUUSD.CFD)$ it plummeted by more than 3%, completely erasing earlier gains and dropping near $4,550 before rebounding somewhat; $XAG/USD (XAGUSD.FX)$ it plummeted over 5% during the day, U.S. stock futures declined, the U.S. dollar index rose by 0.5% and returned above the 100 mark, while crude oil prices surged more than 7%.
Independent metals trader Tai Wong noted, 'Gold began to retreat after two spectacular days because Trump's tone was rather bellicose, referring to aggressive plans in the coming weeks... This suggests the optimism of recent days has been exuberant, and there may be some pullback ahead of the long weekend.'
In his speech, the U.S. leader also stated that military actions had largely achieved their objectives while strongly urging allies dependent on Middle Eastern oil supplies to urgently address the near-complete blockade of the Strait of Hormuz.
The market remains deeply concerned about energy shipments through the Strait of Hormuz, which prior to the outbreak of war carried one-fifth of the world’s oil and liquefied natural gas. These market fluctuations continue the 'same old script' since the start of the conflict: gold’s safe-haven appeal has diminished significantly as investors urgently need liquidity to cover losses in other markets.
OCBC Bank strategist Christopher Wong stated that Trump's remarks 'essentially declared a military victory rather than announcing a ceasefire.' He pointed out: 'Gold had performed exceptionally well, surging to $4,800 intraday. However, going forward, concerns about potential U.S. ground operations in Iran could dampen risk appetite, weakening gold’s upward momentum.'
Gold's sudden reversal on Thursday put its four-day winning streak at risk of ending. Given Trump's indication that the U.S. might withdraw from Iran within two to three weeks, traders had been betting that the Federal Reserve might need to cut interest rates to address a potential prolonged economic recession.
Jun Bei Liu, Chief Portfolio Manager at Ten Cap, said: 'Thursday’s decline could also be attributed to investors choosing to take profits ahead of the extended Easter weekend.'
In March this year, gold prices plummeted nearly 12%, marking the worst monthly performance since October 2008. Rising oil prices directly quashed market expectations for Fed rate cuts, again overshadowing gold’s traditional safe-haven appeal.
Editor/Doris