April 22 is approaching, can the gold technical bottom still hold?

Huitong Network, April 20—— On Monday, April 20, spot gold came under pressure after the market opened, currently trading around $4,790/ounce, with a daily drop of about 0.8%. WTI crude oil prices simultaneously rose to $88/barrel, an increase of more than 5%, while Brent crude moved up to around $95/barrel, up about 4.7%. The US Dollar Index remained slightly stronger near 98.3, and the US 10-year Treasury yield rose to 4.27%.

On Monday, April 20, spot gold came under pressure after the market opened, currently trading at around $4,790/ounce, with a daily decline of about 0.8%. WTI crude oil prices simultaneously rose to $88/barrel, up more than 5%, while Brent crude moved to near $95/barrel, up about 4.7%. The US Dollar Index remained slightly stronger around 98.3, and the US 10-year Treasury yield climbed to 4.27%.

These changes are directly driven by the latest developments in US-Iran tensions: renewed risks of conflict around the Strait of Hormuz, a fragile ceasefire agreement facing expiration pressure on April 22 (Wednesday), and Pakistan stepping up diplomatic mediation, aiming to push both sides for dialogue as early as Tuesday. Against this backdrop, gold as a non-yield bearing asset sees its safe-haven premium eroded by a strong dollar and high yields.

Geopolitical Risks Escalate Amid Energy Supply Concerns

Since the weekend, confrontation between the US and Iran in the Strait of Hormuz has further intensified. The US side reported a friction event with an Iranian cargo ship, while Iranian officials warned they might take military action and explicitly refused a new round of peace talks. Iran reiterated maintaining its control over the strait as a key leverage, only possibly loosening passage restrictions to a limited extent, rather than fully opening. This has directly heightened market concerns over disruptions in energy supply, resulting in a rebound in oil prices. Rising oil prices have not only elevated global inflation expectations but also reinforced the dollar’s safe-haven appeal, which in turn directly suppresses gold prices. Over the past week, gold saw a rebound when the dollar temporarily weakened, but the current linkage between geopolitical uncertainty and energy prices effectively caps gold’s upward space.

Oil Price-Driven Inflation Strengthens Dollar and Yields

The rapid climb in oil prices is transmitting directly to inflation expectations through higher energy costs. The market widely believes this could delay the pace of Federal Reserve policy easing, even with the current federal funds rate holding in the 3.5%-3.75% range. A higher inflation trajectory is pushing up US Treasury yields, with the 10-year yield stabilizing at 4.27%, further strengthening the dollar exchange rate. As a zero-yield asset, gold’s attractiveness wanes in this environment. Traders observed that last week’s dollar weakness briefly benefited a gold rebound, but the current inflation dynamics driven by oil prices have reversed this trend. The high-yield environment continues to pressure non-yield bearing assets, and though geopolitical risks provide some support, they cannot fully offset the macro-level selling pressure. In the short term, gold prices will hinge on the tug-of-war between the dollar and yields.

Solid Technical Structure, Long-Term Support Intact

Despite near-term pressure, the overall technical structure of spot gold remains intact. Prices are currently holding above a key upward trendline support at around $4,770/ounce. Should this level continue to hold, gold prices could consolidate and attempt a rebound; conversely, a break may trigger a deeper pullback. The 100-day moving average is near $4,720/ounce, providing further technical support. If the geopolitical headlines shift toward easing or the oil price rally slows, a solid technical structure would offer gold room for upward recovery. Overall, the long-term trend is still supported, but the current consolidation phase demands heightened market vigilance.

Diplomatic Mediation Dynamics and Short-Term Market Expectations

Since Sunday, Pakistan has intensified its diplomatic engagements seeking to facilitate US-Iran dialogue as soon as Tuesday. The US president remains optimistic about an agreement and has sent representatives to Islamabad, but Iran has not yet confirmed participation. The ceasefire agreement is set to expire on April 22 (UTC+8); if no substantial progress occurs, market volatility is likely to stay elevated. Traders are weighing each diplomatic signal: optimistic expectations may momentarily ease oil price pressures, but Iran’s insistence on controlling the strait indicates a comprehensive agreement remains difficult. In the short term, gold will continue to fluctuate in response to these headlines, and any unexpected escalation or easing could trigger significant market moves.

Frequently Asked Questions

Question 1: Why does escalating geopolitical tension suppress gold prices instead?

Answer: Although geopolitical risk traditionally boosts gold’s safe-haven demand, the current sharp rise in oil prices is directly lifting inflation expectations, causing the dollar to strengthen and yields to rise. As a non-yield asset, the holding cost of gold increases, and safe-haven buying is offset by macro-level selling pressure, resulting in short-term weakness.

Question 2: How will surging oil prices affect the Federal Reserve's policy trajectory?

Answer: Rising energy prices will push up overall inflation data, possibly delaying the pace of Federal Reserve rate cuts. Even with current rates stable, shifts in easing expectations will further support the dollar and limit gold’s upside. Traders should closely follow subsequent inflation data and Fed officials’ statements.