Zong Xiaoli: The Middle East situation has become deadlocked. What are the next moves for the US dollar and gold?

As gold experienced a sharp decline yesterday, many people were left confused. How is it that while the Middle East situation is intensifying, gold is not rising but falling instead? Could it be a reversal of the trend? This contradicts previous logic, where geopolitical tensions usually boost gold prices. So what’s really going on?

In fact, this behavior can be seen as a shift from “buy the rumor, sell the fact.” Previously, increased Middle East tensions led to a tightening market, pushing gold prices higher. Now that the situation has actually escalated, the market is fulfilling those expectations, causing many long positions to be closed out, which results in a drop in gold prices. However, this decline has been quite significant and somewhat unusual, so I advise caution in the near term to avoid further surprises that could catch everyone off guard.

Regarding the US dollar, it is currently facing some resistance. After reaching 99.68 yesterday, it has struggled to break above that level. This indicates that it’s quite difficult for the dollar to easily surpass 100. As the dollar index faces increasing pressure today, a pullback in the market is possible. Therefore, watch for volatility and consider shorting on rallies.

As for gold’s future trend, many expect it to rebound after yesterday’s sharp drop. However, I remain cautious. Market liquidity is becoming increasingly scarce, and if liquidity continues to dry up, there’s a risk of further downward pressure on gold as traders may push prices down to extract liquidity. The Middle East situation is still in its early stages, and the real impact on gold has just begun. This influence is no longer purely bullish but more diversified, with both upward and downward movements. Stay alert and consider shorting on rallies for safer trading today.