Weekly review for March 30th - April 3rd

Last week's review: Against the backdrop of the US-Iran conflict, the market experienced significant intraday volatility. Earlier hawkish rhetoric once triggered a roughly 2% decline in the three major indices, with the VIX quickly rising. However, driven by bargain hunting and technical recovery, the indices bottomed out and rebounded, currently trading near the 20-day moving average. This level itself holds significant divergence implications. Bulls believe the market has ended the consecutive weeks of adjustment and entered a phase of rebound, with the Russell 2000 and semiconductor indices also reclaiming key moving averages, indicating that panic selling may have bottomed out for now. On the other hand, the rebound has been accompanied by noticeably shrinking volume, and the 20-day moving average itself is a typical bull-bear watershed. Therefore, the core market divergence lies in whether this is just a technical rebound after an oversold condition or the starting point of a new upward trend.

From a macro and geopolitical perspective, the current situation remains highly uncertain. On one hand, the market has received some signals of de-escalation. On the other hand, Iran's stance remains firm, with no substantial progress on the Strait of Hormuz issue, and multi-party mediation is at a stalemate, making it difficult to see a clear outcome in the short term. Meanwhile, the non-farm payroll data released on Friday was significantly stronger than expected, triggering a rapid rise in US Treasury yields, a renewed strengthening of the US dollar index, and compressed market expectations for Fed rate cuts. This combination implies a phase of tightening liquidity, putting pressure on equity markets. Therefore, from a trading rhythm perspective, the market faces downward pressure at the opening next week. However, it should be noted that at this stage, the influence of traditional economic data is waning, with market pricing being more dominated by geopolitical conflicts. Especially as key time points approach and competition among various parties intensifies, any new news could rapidly change market direction.

Looking further, the key variable for the market's medium-term trend remains oil prices. If the conflict escalates and pushes oil prices up to around $120, it will significantly increase downward pressure on the market. If the conflict drags on, even extending into May or longer, oil prices have the potential to surge into even higher ranges. In this context, although some capital can be observed attempting to enter the market at key levels, the overall strength is noticeably weaker than in similar past stages. Therefore, the possibility of the indices testing lower levels again after consolidating at current levels cannot be ruled out. From a risk control perspective, a more reasonable strategy at this stage is still to increase cash holdings, waiting for further digestion of uncertainties, rather than rushing to participate in directional trades.

Regarding gold's performance, it needs to be understood from a deeper logic. This round of gold decline does not mean its safe-haven attribute has failed, but rather it is being suppressed by liquidity and the US dollar system. Rising oil prices push up inflation expectations, narrowing the Fed's room for rate cuts, thereby driving up US Treasury yields and weakening gold's relative attractiveness. Simultaneously, rising energy prices increase global demand for the US dollar, forcing the market to sell assets to obtain dollar liquidity, a process in which gold is also impacted. Combined with ETF outflows and programmatic trading amplifying volatility, this creates temporary downward pressure. Essentially, this is an adjustment driven by liquidity contraction, not a reversal of gold's long-term logic.

From a longer-term perspective, gold's core supporting logic remains unchanged. Global central banks continue to increase gold holdings, de-dollarization trends are still advancing, and global debt levels keep expanding. These three factors together form the foundation for gold's long-term rise. Under different scenarios, gold may follow different paths: if the conflict de-escalates relatively quickly, with oil prices falling and monetary policy turning accommodative, gold could see a rapid recovery bounce. If the conflict persists, with oil prices remaining high and bringing stagflationary pressure, gold may face continued short-term pressure, but this would instead build a deeper medium- to long-term buying zone. Therefore, short-term volatility does not change the long-term trend and instead provides opportunities for gradual allocation.

In summary, the current market is essentially an interconnected game between energy, the US dollar, and asset pricing power. Short-term uncertainty is extremely high, with volatility primarily driven by geopolitical events. The medium term depends on oil price trends, while the long term still returns to liquidity and the monetary system. In such an environment, the direction of equity assets is difficult to judge, and operations should be defensive. For gold, a phased allocation approach can be adopted amidst the volatility. Overall, this is not a stage with clear trends, but rather a transitional period requiring position control and waiting for signals to gradually become clearer.