The fires of war in the Middle East cannot crush the faith in gold! Buying pressure at lows sounds the trumpet of the return of the gold bull market "King's return"

With buy orders on dips providing major support for the recent upward trend in gold prices, and as the market awaits further clarification on the duration of the ongoing Middle East geopolitical conflict, the price of gold has seen two consecutive trading days of gains. According to some Wall Street senior analysts who are long-term bullish on gold, the current price curve of gold seems to be following a trajectory of "long-term bull market logic not collapsing and bulls regaining pricing power after a short-term deep retracement," and they emphasize that currency devaluation, long-term inflation risks, and escalating fiscal deficits are still long-term structural tailwinds for gold. During Monday's trading session, the spot price of gold rose by 1.9%, with intraday gains reaching as high as nearly 4%. The closing price finally returned to above $4,500 per ounce for the first time in nearly a week, before pulling back some gains as market sentiment warmed up on the prospects of resolving the Iran issue diplomatically. Despite the continuous rise in oil prices since the end of February when the United States/Israel joint attack on Iran triggered a new round of Middle East geopolitical conflict, gold spot and futures prices have shown resilience. With inflation and stagflation concerns putting pressure on almost all risk assets including stocks and high-yield bonds, some large institutional investors are starting to buy into classic safe-haven assets like gold as prices pull back. Furthermore, during a market session on Monday, Federal Reserve Chairman Jerome Powell suggested that consumers' long-term inflation expectations seem to be under control, which prompted traders to re-bet on the Fed restarting rate cuts for the remainder of the year. This significantly eased concerns in the market that rising oil prices could lead to continued tightening of global central bank monetary policies. While extended high benchmark interest rates pose a significant long-term headwind for non-yielding precious metals like gold, the dovish signals from the Fed and the market's return to betting on rate cuts bode well for gold. Buying on dips brings gold back from the brink of a bear market U.S. President Donald Trump once again threatened on Monday that if the Strait of Hormuz is not reopened soon, the United States will destroy all of Iran's critical energy and infrastructure assets. With more U.S. military forces arriving in the Middle East, concerns about a full-scale escalation of the conflict in the Middle East have heightened. Iran-backed Houthi forces were involved in the geopolitical conflict over the weekend, signaling a further escalation of the war situation. On the one hand, as Pakistan, Egypt, Saudi Arabia, and Turkey actively meet and seek diplomatic ways to end the war, market risk-off sentiment has eased down. On the other hand, a new round of missile strikes by Israel has left some important areas in Tehran without power for the first time, and Iran has attacked aluminum smelters in Bahrain and the United Arab Emirates. While casualties and war dynamics can be concealed or misrepresented in official statements, the latest developments on the frontlines do not lie, and the situation does not seem to be proceeding as optimistically as described by the Trump administration in terms of negotiations and mutual agreement. The recent developments have intensified concerns in the market about the potential prolongation of this geopolitical conflict, and they may force major global central banks, including the Fed, to maintain interest rates or possibly even pivot towards raising rates in order to curb inflationary pressures. In addition, since the outbreak of the Iran conflict at the end of February, gold spot and futures prices have fallen by 15%. This recent trajectory of price corrections for gold pushed several technical indicators into the "oversold" or equivalent price ranges last week. Subsequently, gold prices stabilized under strong buying pressure from institutions and ended a three-week downtrend. As shown in the chart, gold seems to have found significant support around $4,500. However, given the already fragile global economic growth outlook that may witness a sharp slowdown due to energy inflation resulting from geopolitical conflicts, expectations of rate hikes may be significantly suppressed. Some of the largest asset management firms on Wall Street believe that global financial markets have underestimated the risks of global economic downturn, which will ultimately drive down U.S. Treasury yields - significantly reducing the opportunity cost of holding gold and making this precious metal more attractive for long-term investments. "As gold attracts institutional buying on dips, history shows that when key participants like ETF assets and others show signs of capitulation selling, it often precedes a strong uptrend. But the current market confidence in gold may only be temporary," said Tatiana Darie, a senior macro strategist at Bloomberg Strategists Markets Live. The price of gold is being lifted back from the "technical bear market edge" by substantial buying on dips. The most direct evidence is when the spot gold price fell to a four-month low of $4,097.99 in late March and breached the 200-day moving average, but then it rebounded by over 3% in a single day on March 27, returning to the critical support level above $4,500 on March 30. The decline in gold from its peak in January reached a significant 20% decrease, raising hopes for the largest outflow of gold ETF funds since 2022. However, strong buying on dips began last week, especially pushing the spot gold price to a 3% gain in a single day last Friday, highlighting a strong counteraction to the previous sell-off triggered by the surge in oil prices, repricing of inflation trends, and liquidity squeeze. Some bullish forces in the gold market believe that the downward trajectory of gold since February is more like a phase of "high-interest-rate panic overwhelming the safe-haven property," and now the market is reassessing the pricing of safe haven and hedging properties under the backdrop of warfare and fiscal deficit challenges in developed markets. The long-term bullish logic for the gold price remains very strong! Are we about to witness a new bull market for gold standing above $4,500? Major Wall Street financial giants such as Fidelity, Citigroup, and JPMorgan have been vocal in supporting the long-term bullish logic for gold prices - inflation risks, global fiscal deficit pressures, and global bond credibility issues are still long-term tailwinds for gold prices, and this recent pullback may be a rare strategic buying opportunity. Several market veterans insist that the structural substantive logic supporting gold has not shown any degree of collapse or change. George Efstathopoulos, a fund manager at Fidelity International, stated that this pullback is a significant buying opportunity, emphasizing that "inflation risks, fiscal pressures, and the bond credibility issues of developed markets like the U.S. and Japan are still long-term structural tailwinds for gold." The global commodity research director at Citigroup, Max Layton, recently stated in an interview that once speculative positions are cleared, the bank will "actively favor gold," expressing confidence in gold prices being higher than current levels a year from now. Renowned strategist Michael Hartnett of Bank of America, often referred to as the "most accurate strategist on Wall Street," recently released a research report stating that policy panic by the Trump administration is a highly likely event to avoid an economic recession. He believes that the best trading themes are to go long on steepening yield curves and consumer stocks; at the same time, with the loss of presidential credibility often leading to a bear market in the U.S. dollar and global developed market fiscal expansions (especially in Europe with larger-scale expenditures on defense and energy, as well as Japan's staggering debt pressure), gold and international stock market bull markets will return opportunistically. The Iran conflict has brought fears of rising oil prices, inflation, and "longer and higher benchmark rates" to the global trading floor, causing non-yielding precious metal assets like gold to face liquidity pressures and rate suppression initially; but as markets begin to factor in economic slowdowns, bond yield declines, fiscal deficit expansions, and a return to risk-off strategies, gold is regaining support. In addition, gold's weakness in this round of US-Iran conflict is akin to the performance in the initial stages of many historical geopolitical conflicts - where gold first drops before rising. JPMorgan, a super-bull on gold, maintains its target of $6,300 for gold by the end of 2026, not solely based on geopolitical factors such as warfare but on a deeper level of the global "reserve currency paradigm shift" - including continuous gold purchases by global central banks, ongoing reductions in U.S. bond holdings by global financial institutions, as well as the increasingly difficult resolution of fiscal deficits in developed markets like the U.S. and Japan, along with a broader trend of global investor asset repositioning. Even as the Iran conflict's outcome becomes increasingly unclear, UBS reiterated its judgment in the $5,900 to $6,200 range in mid-March, emphasizing that gold truly hedges against the risks of currency devaluation, a return to hedging logic, a global economic slowdown and the demand for global asset reconfiguration, global central bank de-dollarization, retail investors' diversification demand, rather than a linear logic of "the more intense the conflict, the higher the gold price." - Translation by Jiong Hu