Rising oil prices – pressure on gold? FOREXCOM:XAUUSD by Chum_trades — TradingView

Rising tensions in the Middle East are pushing oil prices higher due to the risk of supply disruptions.

Geopolitical turmoil typically supports gold. However, in the current environment, higher oil prices may put short-term pressure on gold.

To understand this dynamic, we need to view markets in terms of intermarket relationships.

1. U.S. economic data begins to weaken

The latest labor market data suggests the U.S. economy is starting to slow:

Nonfarm employment:
-92K (expected +58K)

unemployment rate:
4.4% (up from 4.3%)

ADP Employment Report:
Approximately 63,000 jobs

These numbers indicate that the labor market is beginning to soften.

The fundamental problem, however, is that inflation has not completely disappeared, especially as energy prices rise again.

2. Rising oil prices complicate the Fed’s policy path

Tensions between the United States and Iran are heightening risks around the Strait of Hormuz, which transports about 20% of the world’s oil supplies.

In the event of a supply disruption:

Oil ↑ → Inflation ↑

This leaves the Fed facing a difficult equation:

Interest rate cut→Inflation risk returns

Maintain high interest rates → economic slowdown

Historically, when faced with this choice, the Fed has tended to prioritize controlling inflation.

3. Influence between markets

If oil prices continue to rise, the following reactions may occur:

Oil↑
→Inflation↑
→ Delay rate cut
→ Strong dollar

A stronger U.S. dollar typically causes gold to come under pressure or enter a period of volatility in the short term.

In other words, oil may become an important factor affecting the direction of gold at this time.

4. Variables traders should monitor

At present, the market is mainly concerned about three factors:

1️⃣ Tensions in the Middle East, especially around the Strait of Hormuz
2️⃣Oil price trends
3️⃣The Federal Reserve’s policies to deal with inflation

These factors will determine whether gold will:

He continues to correct

Entering the horizontal consolidation stage

Or resume the upward trend

an important historical issue

There has been a period in the past when oil prices rose sharply…
Then the price of gold collapsed.

It happened in the early 1980s.

Will such a scene happen again in this session?

👉I will discuss this issue in the next article:

Oil Prices Rising – Could Gold Repeat the 1980 Crash?

We will review the oil and gold cycles and Federal Reserve policy from 1970 to 1980 and compare them to current market conditions.

💬 If you find this analysis useful:

Leave a 🚀 and share your opinion in the comments.

This will help this analysis attract more traders on TradingView and I will continue to publish the next part of this series.