ATFX: US-Iran negotiations begin, gold rises, crude oil falls

Topic: ATFX Forex Column Submission

March 25, ATFX: The 48-hour deadline claimed by Trump has expired, but Iran did not launch a thunderbolt action; instead, Trump is engaging in self-directed peace negotiations. Trump stated that he has had a two-day negotiation with a mysterious figure in Iran, and due to the relatively smooth progress, he will no longer carry out bombing on Iran.

On Tuesday, Trump said the United States and Iran are “currently negotiating,” with several American officials involved, including Vice President Pence and Secretary of State Pompeo. However, almost all Iranian officials deny having any direct or indirect negotiations with the U.S. This makes Trump’s statement seem more like a blatant lie.

Logically, if Trump revealed the name or position of the negotiation partner, he would very likely be harmed by radical elements within Iran. Therefore, not disclosing the identity of the negotiator is also a form of protection. As the President of the United States, Trump is unlikely to lie; the negotiations may indeed be happening in secret, just without a clear outcome yet.

Although not confirmed by Iran, there have already been market reactions. Since March 23, international gold prices rebounded from $4,098 to $4,602. During the same period, international oil prices fell from over $100 to around $83. Gold prices rose, oil prices fell. This indicates that market participants are very optimistic about the reopening of the Strait of Hormuz. If Iran reopens the Strait, the tension on the global oil supply side will significantly ease, and the Fed’s expectation of interest rate cuts by 2026 will be reinforced.

If negotiations are successful, oil prices will fall, the Fed will cut interest rates, and gold will rise; if negotiations fail, oil prices will rise, the Fed will tighten monetary policy, and gold will fall. The logic is very clear. Currently, market participants are betting on the first scenario. However, we believe that before Iran admits to peace negotiations with the U.S., or before Trump presents a definitive negotiation outcome, this optimistic sentiment is very likely to come to an abrupt end.

▲ATFX Chart

In terms of market trend, gold formed two significant peaks at 5597 and 5419 on January 29 and March 2, respectively. The peaks are decreasing sequentially, forming a classic double top/head and shoulders pattern, indicating that the medium- to long-term trend may have shifted from bullish to bearish. Since early March, the downward wave has been operating within the channel line shown in the chart. This week, the K-line broke below the lower boundary of the channel but rebounded back inside the channel at the close. If there are no sudden shocks from the news, the future trend is very likely to move toward the upper boundary of the channel.

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Editor: Chen Ping