Geopolitical tensions and a stronger dollar suppress gold prices, limiting gold's gains

Today (June 23), spot gold fell about 0.4% to $3,354 per ounce, as the U.S. dollar (USD) continued to rise, coupled with the U.S.'s tough geopolitical policy and the Federal Reserve's hawkish stance, suppressed the momentum of gold bulls. Although the U.S. military attacked Iran's nuclear facilities and Israel and Iran exchanged fire, the Middle East risk has increased in the short term, but the market's risk aversion has been offset by the appreciation of the U.S. dollar and the Fed's hint of a delayed interest rate cut, so that the gold price has not rebounded significantly.

The reason why gold "cannot rise" is mainly affected by two aspects ——one is the dollar's risk aversion and high interest rate expectations. The U.S. dollar index (DXY) once rose by 0.3%. Gold itself does not generate interest and faces an increase in opportunity costs, which has become the main reason for suppression.

Secondly, geopolitical risks have not really led to supply tensions. The market believes that even if the conflict in the Middle East heats up, oil supply will not be interrupted in the short term, and the demand for gold price hedging is limited.

Technically, gold is currently hovering between $3,348 and $3,400. If it falls below $3,324 or the $3,300 mark, it may trigger a new wave of selling pressure. If the dollar falls or the Fed turns dovish, gold prices may restart a new round of upswings if they break through the upper resistance.

Next, investors are advised to pay attention to the trend of the dollar and U.S. bond yields. If the dollar continues to be strong, gold will be suppressed; on the contrary, if it falls, gold has a chance to catch up. The second is the Fed's remarks and economic data. If the Fed turns dovish or inflation weakens, gold may be favored by funds. The geopolitical situation should not be ignored. Pay attention to whether the conflict in the Middle East escalates to a substantial supply disruption, such as the blockade of Hormuz or the war out of control. Oil prices and metals may soar simultaneously, and gold prices will also receive strong support.