ATFX: Gold prices remain stagnant for two consecutive days; a single statement from the Federal Reserve could trigger volatility

Special Topic: ATFX Forex Column Submission

On March 18, ATFX: Due to investors weighing the Federal Reserve’s rate cut path against inflation risks from Middle East conflicts, gold prices continue to fluctuate within a narrow range, with volatility below 1.5% for two consecutive days. In the Asian session today, gold remains at $5,000 per ounce. The Federal Reserve is expected to keep interest rates unchanged Thursday morning, but investors will closely watch the Fed’s views on rising energy prices and a soft labor market.

▲ATFX Chart

Faced with energy shocks from the Iran situation, the Federal Reserve finds itself in a further dilemma. As energy prices and inflation concerns surge simultaneously, market expectations for rate cuts by the Fed are declining, with forecasts now suggesting a possible cut only in September (previously, markets expected two cuts this year, each by 25 basis points, but now only one is anticipated).

The ongoing Middle East tensions entering their third week have escalated again, with the US and Israel launching overnight strikes, and Iran confirming the death of National Security Advisor Ali Larijani. Tehran continues attacks on energy infrastructure in Gulf countries, and shipping through the Strait of Hormuz has nearly come to a halt.

Energy supply shortages and rising crude oil prices have sparked inflation worries and reduced the likelihood of recent rate cuts by the Fed and other central banks, as higher borrowing costs typically negatively impact non-interest-bearing precious metals. Currently, the gold market is in a rare “balance”: on one side, safe-haven demand driven by Middle East conflict escalation; on the other, bearish pressure from inflation concerns. Market expectations for rate cuts have sharply fallen from 55 basis points before the conflict to about 25 basis points, with only one cut expected this year.

The upcoming update to the Fed’s dot plot will directly reflect rate cut prospects and is a key factor influencing market volatility. Analysts generally expect the dot plot to possibly raise the median interest rate for the end of 2026 from 3.9%, indicating a “higher for longer” policy path. Deutsche Bank even suggests that the number of officials supporting only one rate cut or no cuts this year could double.

If the dot plot shows only one rate cut this year: in line with current market expectations, gold prices may dip slightly to $4,950–$5,000 before stabilizing.

If the dot plot indicates no rate cuts this year (hawkish surprise): gold could effectively break below the $5,000 level, heading toward $4,900.

If a possibility of two rate cuts remains (dovish surprise): gold may rebound above $5,100.

Additionally, a key focus is how Chair Powell will assess the impact of Middle East conflicts and inflation. Will he acknowledge the “stagflation risk” (slowing growth + high inflation)? If Powell emphasizes “transitory” inflation, denies extreme expectations, and suggests current inflation is mainly due to supply shocks and policy adjustments rather than demand overheating, it indicates the Fed may remain patient on rate cuts. Alternatively, Powell might acknowledge stagflation characteristics but interpret them as a “temporary phase not requiring overreaction.”

Therefore, Powell’s wording could influence market perceptions of whether the Fed is “hawkish” or “dovish.” A dovish signal would suppress the dollar, boost risk appetite, and give gold a breather, potentially re-accumulating long positions. However, if Powell’s statement’s core message is that the Fed is willing to tolerate “mild stagflation” without rushing to hike due to supply shocks, but also not preemptively cutting, gold may continue to fluctuate in the short term. While positions may remain below $5,000, the long-term bullish case for gold remains solid.

Sina’s major platform for futures account opening—safe, fast, and reliable.

Massive information, precise analysis, all on Sina Finance APP.

Editor: Chen Ping