Gold prices likely to stay volatile

The market remains uncertain about what the next steps will be in the ongoing tensions between the USA and Iran. No one can provide reliable forecasts, as the future is unpredictable in the coming days. This week has seen volatility in global financial markets, driven by hope for improvement. Despite the prevailing uncertainty and panic among global stock markets, there exists a glimmer of hope for genuine peace in the upcoming weeks and months. A diplomatic effort made a couple of weeks ago in Islamabad seemed serious, but ultimately ended without a clear agreement. Currently, the delay in the full operation of the Strait of Hormuz poses significant concerns for the global economy, leading to distorted prices for commodities and essential imports that nearly triggered a worldwide crisis. Oil prices, crucial for oil-importing nations and the sellers, are being quoted differently. There is a stark disconnect between physical oil prices and the paper prices displayed on trading screens. Physical prices are nearly of above $50 per barrel, while future contracts are trading in backwardation (it is a situation where forward price of the futures oil contract is lower than the spot price), reflecting a short-term response to supply constraints amid hopes for a peaceful resolution. It is estimated that refineries are facing a shortfall of 11 to 13 million barrels of oil per day. On Friday, news of a potential agreement expected over the weekend led to a sharp decline in oil prices, dropping by about 10% to 12%. The market is now attributing this drop to insider trading. Until a conclusive agreement is reached, oil buyers will primarily focus on physical oil prices. A critical issue on the horizon is the upcoming expiration of the ceasefire on April 22. Without an officially declared ceasefire, the market could face another wave of extreme volatility. In my previous post, I highlighted the delayed inflation effects on the economy. The recently released economic data indicated rises in both the US consumer price index (CPI) and producer price index (PPI). If oil prices remain elevated, it may lead to more economic challenges in the months ahead. Meanwhile, easing oil prices have followed Iran’s announcement of fully reopening the Strait of Hormuz for commercial traffic due to a 10-day ceasefire agreement between Israel and Lebanon. The conflict in the Gulf region, which has persisted for seven weeks, is still ongoing. Financial markets will continue to monitor statements from officials on both sides, but geopolitical risks will remain high until a permanent agreement is achieved. The rising global energy costs are putting considerable pressure on businesses worldwide. Meanwhile, during this time, major currencies have remained stable, with the Euro, Pound Sterling, and Japanese Yen gaining some strength against the US Dollar. However, the Bank of Japan (BOJ) has not provided a clear direction for the market regarding its next moves, maintaining a data-dependent approach. Historically, the BOJ would give the market advance notice of its decisions, but it seems to be exercising caution due to geopolitical uncertainties, which the market recognises. Last week, gold experienced more extensive fluctuations in a volatile trading environment. It appears that gold is still trying to find a clearer trajectory, with fewer incentives to move decisively in a stronger direction. The current volatility stems from the unpredictable geopolitical situation. However, in contrast to the past, recent shifts in market trading strategies have also contributed to this volatility, as the trading patterns during all three sessions vary due to central banks purchasing gold for their portfolios and a heightened interest in precious metals from investors. I believe this week the market will continue to push gold in both directions as it seeks direction. However, I think the trading conditions in the metals market will remain erratic for an extended period since the ongoing political crisis is unlikely to be resolved quickly. It is unrealistic to expect that an issue that has spanned over four decades will be settled in just a few meetings, which will continue to impact the global economic system for an extended time. If the situation drags on, the global economy will stay under significant stress due to supply limitations and tighter liquidity conditions. Such circumstances do not bolster gold prices and could deter central banks from acquiring gold. Since they need to maintain sufficient liquid assets, they are unlikely to buy gold unless they have surplus funds, which is a vital source of support for the metal. This week, much will hinge on news regarding a ceasefire. A resolution or even a temporary truce could provide gold with a boost. However, challenges lie ahead. Delays in a US rate cut, inflation risks, and unresolved trade issues will influence trading conditions, leading to ongoing volatility in the market. Gold needs to rise above $ 4975 to reach $ 5025, while $ 4710 acts as a critical support level. A break below that could trigger further losses. WEEKLY OUTLOOK – APR 20-24 #GOLD @$4830- Gold prices are likely to stay volatile. To hit $5040, it must first rise above the resistance level of $4950. Support levels are around $4720 and $4650. If gold is unable to break through these resistance levels, a bigger drop could happen. #EURO @1. 1764- The Euro might see additional gains before it starts to decline. It has to break through the resistance level of 1. 1850 in order to reach 1. 1920. However, the risk lies in not being able to move past this resistance, which could lead to a drop towards 1. 1675 or 1. 1602. #GBP @1. 3517- Recently, the Pound Sterling has been rebounding after experiencing a decline for more than a month. Nonetheless, there is a risk of further decrease unless it exceeds 1. 3650, a level that appears challenging to reach. A drop below 1. 3395 would indicate that additional losses are likely ahead. On the other hand, if it holds steady, the Cable may continue to recover. #JPY @158. 64- The USD/JPY pair may experience some further recovery, but 157. 10 should hold firm against any upward movement. A breakthrough at 159. 95-05 would boost confidence towards reaching 160. 70. If not, the next level of support is around 155. 50. Copyright Business Recorder, 2026

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