Strait of Hormuz Opens and Closes Again, Gold Prices Plunge Nearly $100 at Open, Will Gold Rise or Fall This Week?

As a vital global shipping route, the Strait of Hormuz handles approximately 20% of global crude oil transport; its operational stability is a key determinant of oil price trends.

Last Friday (April 17), as U.S.-Iran tensions eased, Iran announced the opening of the Strait of Hormuz to commercial shipping. Consequently, WTI crude prices saw a maximum intraday drop of over 10% and closed down 9.86%, while gold prices surged by more than $100, driven by the plunge in oil.

One day later, on Saturday (April 18), Iran announced it would re-blockade the Strait of Hormuz. A spokesperson for the Iranian Revolutionary Guard stated that control was reinstated because the United States had reneged on its commitments.

Following the news, at today's market open, WTI crude oil gapped up significantly to $88.15, more than $4 higher than Friday's close ($83.99), while gold opened lower and trended down, at one point falling by more than $100.

WTI daily chart, Source: TradingView

Market performance indicates that the primary trading narrative is currently whether energy transport will face sustained disruptions, which is the core logic supporting high oil prices recently.

Should oil prices rise further, the next step is a reigniting of inflation expectations, which pressures gold. Crude oil is one of the most sensitive variables among all commodities; freight, manufacturing costs, logistics, and food prices are all eventually driven higher by it.

Influenced by sustained high oil prices, U.S. inflation expectations have been significantly raised by the market, while expectations for a Fed rate cut have been markedly weakened. The market even briefly considered the possibility of a rate hike, further weighing on gold. This is the primary reason gold has failed to strengthen on safe-haven sentiment since the U.S.-Iran conflict began.

Currently, the situation in the strait only dictates market sentiment for gold; the true determinants of gold's future upside remain U.S. inflation and Federal Reserve interest rate expectations. Gold is holding firm at high levels because the market is not yet fully convinced that the oil price shock is transitory. Should oil prices remain elevated due to issues in the strait, U.S. inflation expectations will become stickier, and the case for Fed rate cuts this year will weaken. For gold, rising inflation inherently supports the inflation-hedge narrative; however, if interest rates are forced to stay higher for longer, gold will face pressure due to its lack of yield.

Therefore, the core driver for gold right now is not its safe-haven appeal, but whether the market will once again bet on the Fed maintaining higher interest rates for longer. If reports of a blockade in the strait resurface and oil prices continue to spike, gold may be suppressed as inflation expectations rise; conversely, if it is subsequently proven that the blockade has not truly expanded and oil prices retreat, gold could move higher more rapidly. In other words, the current gold market is not characterized by a unidirectional trend, but rather a high-level tug-of-war centered on inflation and interest rate expectations.

Gold Daily Chart. Source: TradingView

Based on the gold daily chart, gold prices continued to climb last Friday, driven by Iran opening the Strait of Hormuz, briefly surging toward the $4,900 mark. However, prices failed to hold effectively above that level and experienced a pullback of over $50 late in the session, eventually closing at $4,834.06. This indicates a failed breakout of the $4,870 resistance level and suggests that markets have priced in the possibility of Iran re-blocking the Strait of Hormuz.

Notably, Iran re-blocked the Strait of Hormuz last Saturday. Gold opened today at $4,763.04, significantly lower than Friday's close, and dipped as low as $4,737.07 intraday, marking a maximum decline of over $100. After a brief and sharp drop, gold quickly recovered to above $4,760, indicating that strong support remains near the $4,760 level.

Gold 4-Hour Chart. Source: TradingView

On the gold 4-hour chart, today's opening price of $4,763.04 sits above both the MA60 and the $4,760 support level, creating a confluence of support. Although the price briefly broke below this level during the session, it closed with a long-bodied bullish candle, demonstrating strong support at this position and further strengthening short-term bullish momentum.

In the short term, if gold prices hold above $4,760 today, they may continue to test the $4,870 resistance level or even the $4,900 mark. Conversely, if gold closes below $4,760 today, it may open the door for a deeper pullback, first testing the previous low of $4,644.34, with the next target being the $4,500 psychological level.

Support Levels: 4,760, 4,644.34

Resistance Levels: 4,870, 5,000

This content was translated using AI and reviewed for clarity. It is for informational purposes only.