ATFX: Gold Awaits Fed Decision Eve, Bulls and Bears Truce Before $5000 Mark

Special Topic: ATFX Forex Column Submission

March 17, ATFX: Gold prices edged lower overnight amid market concerns over inflation triggered by Middle East conflicts, overshadowing the support from a weaker dollar (which fell back from above the 100 level) and safe-haven demand. Additionally, overnight gains in tech stocks lifted U.S. stocks (the S&P 500 index posted its largest single-day increase since February), which also dampened some safe-haven appetite. Spot gold closed down 0.27%, after touching its lowest point since February 19 during the session. During Tuesday’s Asian trading hours, gold prices remained defensive near the key $5,000 level, indicating that although the short-term trend is weak, bulls have not abandoned their defense of this critical price point.

The US-Israel-Iran conflict has entered its third week, with oil prices continuing to influence market sentiment. On Monday, Tehran attacked multiple targets along the Persian Gulf coast, including a major oil hub and a large natural gas field within the UAE. Meanwhile, Trump threatened to expand strikes on Iran’s Halek Island to target its oil infrastructure. At the same time, the International Energy Agency recently agreed to release record emergency reserves and stated that more reserves could be provided if needed.

Regional tensions pushed oil prices higher → increased inflation concerns → reinforced hawkish monetary policy expectations, which temporarily subdued gold’s safe-haven appeal. As market expectations for a Fed rate cut diminish, assets like gold that do not pay interest remain under pressure. The gold market is showing a clear “wait-and-see” and “tug-of-war” stance around the psychological threshold of $5,000 per ounce. Market sentiment remains cautious, with both bulls and bears waiting for Fed Chair Powell’s speech and the dot plot early Thursday to guide the next phase.

▲ATFX Chart

Market expectations are that the Federal Reserve will keep the benchmark interest rate unchanged in the 3.50%-3.75% range this week. Analysts are closely watching for any hawkish signals from Powell’s press conference. The focus will also be on changes in the dot plot, as any signs of reduced rate cuts in 2026 could prolong gold’s correction. Rising borrowing costs generally pressure non-yielding precious metals. Additionally, Powell’s qualitative assessment of inflation and geopolitical risks (whether “transitory” or “persistent”) will determine whether gold breaks downward to continue its correction or rebounds to regain upward momentum.

Overall, before the “big event” of the Fed decision this week, the forces of bullish and bearish factors are relatively balanced, and the market lacks sufficient information to break the deadlock. Therefore, gold prices are likely to continue trading cautiously around $5,000 with a sideways, wait-and-see attitude.

Despite recent corrections, gold has still risen about 16% this year, supported by geopolitical uncertainties and threats to Fed independence, which sustain safe-haven demand. Concerns about stagflation are beneficial for gold in the long term, increasing its appeal as a store of value. Regarding geopolitical developments, any unexpected escalation could instantly ignite buying in gold. The long-term risk of stagflation (growth stagnation plus high inflation) is one of the most favorable environments for gold. Additionally, long-term demand for gold allocation remains, with potential inflows into central bank gold purchases and gold ETFs providing structural support to gold prices and limiting the depth of corrections.