Li Xinheng: Gold drops to 4500, re-enters short positions after the rebound

On Friday, March 20th, during the Asian market session, spot gold rebounded and rose, currently trading around $4,720 per ounce. On Thursday, March 19th, the price of spot gold plummeted 3.5%, closing at $4,650 per ounce, with an intraday drop of over 6%, hitting the lowest point since early February at $4,502. April US gold futures also fell sharply by 5.9%, finally closing at $4,605. This marks the seventh consecutive trading day of decline for gold. Once highly sought after by institutional investors as a safe haven and inflation hedge, gold now seems tightly locked by high interest rates, with a fierce downward trend causing many long investors to feel anxious.

Basic Market News:

The conflict in the Middle East has escalated. Israel launched precise strikes on Iran’s South Pars gas field, prompting a fierce Iranian counterattack—energy facilities across the Middle East have been targeted, from Qatar’s largest natural gas plant to refineries in Saudi Arabia and Kuwait, with none spared. Brent crude oil prices approached $120 per barrel, though they retreated slightly by the close, remaining above $100, ending Thursday at $104 per barrel. The supply shock was so rapid that it directly pushed up global energy costs, causing inflation expectations to spread like wildfire.

Major central banks are taking a tough stance. The European Central Bank kept interest rates unchanged but warned that soaring oil prices could threaten growth and inflation prospects in the Eurozone; the Bank of Japan is inclined to tighten policy but has held steady; the Bank of England unanimously voted to keep borrowing costs unchanged, with some policymakers hinting at possible further rate hikes in the future; the Federal Reserve also maintained rates at 3.50%-3.75% on Wednesday, projecting higher inflation and stable unemployment this year, with only a symbolic rate cut. Investors, worried about currency devaluation, have heavily bought gold, but the logic supporting these trades is rapidly weakening.

Gold’s decline is not isolated. Spot silver plunged 3.3% to $72.82, with an intraday drop of over 12% to $65.45 per ounce; platinum fell 2.7% to $1,966; palladium also declined 2% to $1,446. While geopolitical tensions usually boost safe-haven demand, rising energy costs and inflation are increasing real yields, limiting the upward space for precious metals and exerting downward pressure.

From a technical perspective, the daily chart of gold shows a layered decline pattern. Initially expected to fall to around $4,700 and then further down to $4,500–$4,400, the sharp overnight drop has released significant short-term space. This indicates a bearish correction, but the large move also makes short-term trend prediction more difficult. Intraday, gold may experience a rebound, but it will likely be a short-term oversold bounce. For a correction, watch resistance around the 5-day moving average near $4,830. If the rebound extends to this level, the trend could change. Therefore, today’s focus should be on the $4,700–$4,730 resistance zone, with support around $4,500. The key support remains at the previous low near $4,400.

Looking at the 1-hour chart, gold opened higher in the morning, with a relatively strong rebound. The first resistance is around $4,730, testing whether the price can continue the correction after yesterday’s decline. If the upward momentum strengthens again, consider re-entering positions near the 5-day moving average at $4,830. More real-time entry points should be guided by actual trading conditions.

Today’s trading suggestion: During the intraday rebound, consider a light short position around $4,730–$4,740 with a stop loss at $4,750. Target the area of $4,700–$4,690 for partial profit-taking and risk management, then hold remaining positions with a focus on $4,620–$4,600.

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Editor: Chen Ping