This week's US inflation data, meeting minutes, and GDP "triple shot" could trigger intense volatility in gold prices

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Source: Xinhua Finance

Xinhua Finance Beijing, April 7 — Last week (March 30 to April 3), international spot gold fluctuated and closed up more than 4%, marking two consecutive weeks of gains.

From an analysis perspective, as the conflict between the U.S., Israel, and Iran enters its sixth week, prospects for peace negotiations are bleak. Although the market is temporarily affected by the evolving Middle East situation and energy prices causing “inflation,” the medium- to long-term supply shocks are beginning to show their “stagnation” effects. The initial “inflation” followed by “stagnation” makes the rate hike expectations uncertain, helping gold prices recover upward after the initial shock of the conflict.

Entering a new week, the market is awaiting new guidance on interest rate expectations from the U.S. inflation data, Federal Reserve meeting minutes, and GDP reports, all released in quick succession. Due to the impact of unexpectedly strong non-farm payroll data before the Easter holiday and the ongoing Middle East tensions, gold prices may retreat again at the start of the week, and a clear trend in gold prices is unlikely in the short term.

Middle East Conflict Prolongation Suppresses Short-term Gold Prices

Since the U.S. and Israel launched military strikes against Iran on February 28, the conflict has lasted over a month with no signs of ending. Despite frequent signals from the U.S. about negotiations, threats have also increased. President Trump warned at a White House press conference on the 6th that U.S. forces could destroy all bridges and power plants in Iran within “4 hours.” He also claimed that negotiations with Iran are “progressing very smoothly.”

Under geopolitical turmoil and energy shocks, the gold market shows a complex trend: in the short term, inflation and interest rate pressures suppress prices, while medium- to long-term risk aversion and stagflation reassessment remain strong. The escalation of conflict pushes up oil prices and intensifies global inflation concerns. The market bets on the Federal Reserve delaying rate cuts, with the dollar and U.S. Treasury yields strengthening, weakening the short-term safe-haven effect of gold, and prices fluctuate under pressure. Additionally, institutional selling to raise funds further increases short-term volatility in gold prices.

However, as the conflict continues to escalate geopolitical risk premiums, if the conflict spirals out of control or the Strait of Hormuz remains effectively closed for an extended period, stagflation risks and concerns over U.S. dollar creditworthiness will rise, leading to a reassessment of gold’s value as the ultimate safe-haven asset.

Against this backdrop, institutions like Goldman Sachs maintain their baseline forecast of $5,400 per ounce by the end of 2026, with expectations that worsening conditions could push gold prices toward $6,100.

Federal Reserve Still Faces Dilemma

On the economic data front, the U.S. released its latest non-farm payroll report last Friday, showing an increase of 178k jobs in March, well above market expectations. The unemployment rate fell from 4.4% to 4.3%. This report, amid a reduced probability of rate cuts by the Fed in 2026, provides short-term support for the dollar.

However, a detailed breakdown of the report reveals that the U.S. labor market is not necessarily improving. On one hand, hourly wages and weekly hours declined, inconsistent with the strong employment figures. Earlier released JOLTS data (lagging two months) shows two key employment indicators—quits rate and hiring rate—are very weak. Especially, the hiring rate has fallen to its lowest level since the pandemic. Compared to vacancy data, which has obvious statistical biases, the hiring rate is harder to manipulate. The U.S. is currently in an environment of low layoffs and low hiring.

On the other hand, the initial estimate of February non-farm employment was revised downward from a decrease of 92k to a decrease of 133k.

Additionally, a significant disconnect persists between total non-farm employment (surveyed by institutions) and household employment (surveyed by households). The report shows that non-farm employment in March increased by 178k, exceeding expectations, but household employment was weak, decreasing by 64k, and the labor force shrank sharply by 396k, causing the unemployment rate to fall by 0.1 percentage points to 4.3%.

Other economic indicators show that last week’s U.S. March S&P Global Services PMI fell by 1.9 points to 49.8, hitting a three-year low. Notably, the growth rate of new orders slowed to its slowest in about two years (attributed by respondents to current Middle East conflicts), and employment contracted, indicating that the U.S. labor market may face its most damaging test yet amid the Middle East conflict.

Overall, inflation is accelerating while growth is sharply declining, rapidly evolving into one of the most significant stagflation environments in decades, with stagflation narratives emerging. This puts the Fed in a real dilemma: at such high debt levels, it must choose between supporting growth or controlling inflation.

Short-term Pressure on Gold Prices, Long-term Upward Logic Remains

Looking ahead, due to contradictory statements from the Trump administration regarding Iran, the market remains cautious. If inflation surges again, gold prices are likely to come under pressure.

Technically, gold is temporarily stable around $4,100 per ounce, which coincides with the October moving average, the 200-day moving average on the daily chart, the lower boundary of the downward channel, and the 38.2% retracement of the large range from $1,614 to $5,600, forming a confluence of technical supports. In the short term, resistance is expected around $4,660–4,700 per ounce, with key resistance at $4,850–5,000; support levels are around $4,550–4,350, with critical support at $4,200–4,100.

International silver prices face short-term resistance at $70–73 per ounce, with key resistance at $76–81; support levels are at $65–64, with key support at $60–58.

In China, Shanghai gold faces short-term resistance at 1,050–1,060 yuan/gram, with key resistance at 1,080–1,100 yuan/gram; support at 1,020–1,000 yuan/gram, with critical support at 950–920 yuan/gram. Domestic silver resistance is at 18,500–19,000 yuan/kilogram, with key resistance at 19,500–21,000; support levels are at 17,300–16,800 yuan/kilogram, with critical support at 15,500 yuan/kilogram.

(Author: Li Yuefeng, Researcher at Beijing Gold Economy Development Research Center)

【Gold Time】is a special program jointly produced by Xinhua Finance and China Gold News, focusing on the gold jewelry market. It covers policy developments, investment information, risk analysis, and provides authoritative, professional, and comprehensive financial information services in the gold jewelry sector. Xinhua Finance is the national financial information platform built by Xinhua News Agency.

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