The Middle East war does not crush the faith in gold! Buying pressure on dips sounds the horn of the gold bull market "The Return of the King"

As buying interest on dips formed a significant support for the recent upward trend in gold prices, the gold price experienced a consecutive increase for two trading days. According to some Wall Street senior analysts who are bullish on gold in the long term, the current trajectory of gold prices seems to be following a restorative bullish path after a short-term deep retracement, with the structure resembling a "long-term bull market logic still intact and bulls regaining pricing power after a deep pullback." They emphasize that currency depreciation after the end of geopolitical conflicts, long-term inflation risks, and escalating fiscal deficits pressure are still long-term structural tailwinds for gold. During Monday's trading session, the spot gold price rose by 1.9%, with an intraday increase even reaching close to 4%. The closing price surged back above $4500 per ounce following almost a week, and then retreated some of the gains as the market sentiment improved towards resolving the Iran issue. Despite the continuous rise in oil prices since the end of February due to the US/Israel joint attack on Iran sparking a new round of Middle East geopolitical conflicts, gold spot and futures prices have shown resilience. As inflation and stagflation worries have put pressure on almost all risky assets, some large institutional investors have started to buy into classic safe-haven assets like gold at lower prices. Furthermore, during the Monday session, as Federal Reserve Chairman Jerome Powell mentioned that consumers' long-term inflation expectations seem to be under control, traders repositioned their bets on the Fed restarting its rate-cutting process in the remaining year, significantly easing concerns about tightening global monetary policies due to rising oil prices. The prolonged high benchmark interest rates are undoubtedly a significant long-term headwind for non-yielding precious metals like gold, but the dovish signals from the Fed and the market's return to rate-cutting bets represent a substantial positive for gold. Buying on dips has pulled gold back from the bear market edge US President Donald Trump once again threatened on Monday that if the Strait of Hormuz does not reopen soon for navigation, the US will destroy all significant assets related to Iran's energy and infrastructure. With more US military forces arriving in the Middle East, concerns about a full-scale escalation of the Middle East war have increased. The Iran-backed Houthi forces were embroiled in the geopolitical conflict last weekend, marking a further escalation of the war situation. Just as Pakistan, Egypt, Saudi Arabia, and Turkey have actively met and sought diplomatic ways to end the war and reduce market risk-off sentiment, Israel's new missile strikes caused parts of the important areas in Tehran to lose electricity for the first time, and Iran attacked aluminum smelters in Bahrain and the United Arab Emirates. Casualties and war dynamics statements can hide some of the truth, but these latest developments on the frontlines do not lie, indicating that the situation is not progressing towards the optimistic negotiation and consensus direction described by the Trump administration. The recent developments intensify market concerns about the possibility of prolonged geopolitical conflicts, potentially forcing major global central banks, including the Federal Reserve, to maintain interest rates unchanged for a long time or even shift towards hiking rates to curb inflationary pressures. Additionally, since the outbreak of the Iran war at the end of February, spot and futures gold prices have dropped by 15% amid liquidity squeeze in broader financial markets. The price correction trajectory of gold last week pushed several technical indicators into the "oversold" or equivalent price ranges, and then gold stabilized last week under strong institutional buying pressure and ended the continuous three-week decline. As shown in the chart, gold seems to have found significant support near $4500. However, given the already fragile global economic growth due to potential energy inflation caused by geopolitical conflicts, expectations of rate hikes may be significantly suppressed. Some of the largest fund management institutions on Wall Street have expressed that global financial markets underestimate the risks of global economic downturn, which will ultimately lead to lower US Treasury yields significantly lowering the holding costs of gold and making this precious metal more attractive for long-term investments. "With institutional buying on dips supporting gold, history shows that when key participants like ETF assets exhibit signs of capitulation selling, it often signals a strong uptrend to follow. But the market's confidence in gold may be temporary," said Tatiana Darie, senior macro strategist at Bloomberg Strategists Markets Live. Gold prices are being pulled back from the "technical bear market edge" by massive buying interest on dips. The most direct evidence is that the spot gold price fell to a four-month low of $4097.99 in late March and breached the 200-day moving average, but rebounded by over 3% in a single day on March 27th, returning to the crucial support level above $4500 on March 30th. The decline in gold from the peak closing in January once touched the 20% significant bear market threshold, with outflows from the world's largest gold ETF funds expected to hit record levels since 2022. However, strong buying on dips began last week, especially pushing the spot gold price to rebound by 3% in a single day on Friday, highlighting the counter-reception to the selloff triggered by soaring oil prices, revaluation of inflation trends, and liquidity squeeze. In the view of some gold bulls, the downward trajectory of gold since February seems more like a "periodic mispricing dominated by fears of high interest rates" now the market is reassessing the hedging and diversification attributes of gold under the backdrop of war and fiscal deficit dilemmas in developed markets. The long-term bullish logic for gold prices remains very strong! Will gold at $4500 stage a new bull market? Major Wall Street financial giants such as Fidelity, Citigroup, and JPMorgan have recently been vocal in supporting the unchanged long-term bullish logic for gold prices - inflation risks, global fiscal deficit pressures, and global bond credibility issues still pose long-term tailwinds for gold prices. The recent decline might be a rare strategic buying opportunity. Several market veterans insist that the structural logic supporting gold has not shown any significant breakdown. George Efstathopoulos, a fund manager from Fidelity International, stated that this pullback is a significant buying opportunity, "inflation risks, fiscal pressures, and the credibility issues of bonds in developed markets such as the US and Japan are still long-term structural tailwinds for gold." Citigroup's Global Commodity Research Director, Max Layton, mentioned in a recent interview that once speculative positions are cleared, the bank will "actively bullish on gold" and confident that the price will be above the current level in a year. Michael Hartnett, a Bank of America strategist, known as "Wall Street's most accurate strategist," recently released a research report stating that the Trump administration's policy panic is a high-probability event to avoid an economic recession. Based on this premise, he believes the best trading themes would be long steepening of the yield curve and consumer stocks. Meanwhile, as the loss of presidential credibility often accompanies a bearish dollar market, and with the fiscal expansion in global developed markets (especially Europe's larger-scale spending on defense and energy, as well as Japan's massive debt pressure), gold and international stock markets' bullish trend will return opportunistically. The Iran war has brought fears of rising oil prices, inflation, and "longer and higher benchmark interest rates" to the global trading stage, causing non-yielding precious metals like gold to face liquidity pressure and rate suppression. However, when the market starts to reconsider the economic slowdown, bond yield declines, fiscal deficit expansion, and the return of risk-off allocation strategies, gold is regaining support. Additionally, gold's weakness in this round of the US-Iran conflict, similar to the behavior in the initial stages of many geopolitical conflicts in history, i.e., "gold first drops, then rises during geopolitical conflicts." JPMorgan, a major Wall Street financial giant, is a super bullish gold player, maintaining a year-end 2026 target of $6300 for gold, with its core support logic not solely betting on geopolitical factors like war but a deeper process of global "reserve currency paradigm shift" including ongoing gold holdings by global central banks, continuous reduction of US treasuries by global financial institutions, and the increasingly difficult resolution of fiscal deficits in developed markets like the US and Japan, in addition to the broader trend of global investor asset redistribution. Amid the perplexing direction of the Iran war situation in mid-March, UBS still firmly reiterated its judgment in the range of $5900 to $6200, emphasizing that gold truly hedges against currency depreciation risks brought by further spillovers of geopolitical conflicts, the return of hedging logic, global economic growth downturn, and the need for global asset redistribution, as well as global central banks' de-dollarization shift, retail investors' demand for diversified quality assets, rather than just a linear logic of "the more intense the war, the higher the gold price."