Regarding the impact of the expanding Middle Eastern conflict on gold prices, it is often thought that "it will rise immediately," but in reality, it is not that simple.

The biggest factor influencing gold price movements is actually the Federal Reserve's (FRB) interest rate policy and real interest rates. Geopolitical risks are generally seen as temporary noise in the market. However, if the conflict spreads to Iran or results in the blockade of the Strait of Hormuz, risk aversion and inflation hedging will act simultaneously, definitely pushing up gold prices.

An interesting pattern is the typical "rise on expectations and fall upon realization" in gold prices. Looking at history, during the Gulf War in 1991, gold prices rose by 17% before the war started, but fell by 12% after. The same logic applied to the Iraq War in 2003: a 35% increase before the war, followed by a 13% decline after. If the U.S. can control the military situation, the market tends to sell off gold with confidence.

What about the current situation? In the short term, the delay in interest rate cuts puts downward pressure on gold prices, making them likely to weaken. From April to May, due to Middle Eastern tensions and negotiation processes, a range-bound market is likely to continue, and significant volatility should be expected.

However, from a medium-term perspective, even if the conflict spreads, as long as the U.S. maintains control, rising crude oil prices will push inflation higher, which in turn will delay the Fed's rate cuts. In that case, real interest rates and the strengthening dollar will suppress gold prices. Based on historical patterns, gold prices are likely to return to pre-war levels within 60 to 180 days after the conflict begins.

On the other hand, the long-term outlook is different. If the conflict spreads fully and economic order is lost, gold prices will rise retaliatorily. The acceleration of central bank gold purchases and the "de-dollarization" movement will support an upward trend in gold prices.

Ultimately, three core conditions determine the direction of gold prices. First is the Fed's monetary policy. If the Powell-led Fed maintains a hawkish stance, the dollar will strengthen, suppressing gold prices. Second is the linkage between crude oil prices and inflation. Third is the extent of the spillover of Middle Eastern conflicts and market expectations.

Looking at the past 40 days of U.S. responses, whether the conflict can be controlled is extremely important. If control is lost, chronic energy shortages, loss of inflation control, and declining dollar confidence could occur, potentially breaking through interest rate suppression and shifting into a long-term bullish trend for gold.

Currently, a concern is that the U.S. has lost its previous intimidating image. The global order is being reconstructed, and as long as geopolitical divisions and the "de-dollarization" trend continue, the long-term portfolio value of gold will keep increasing.