Gold prices rebounded after opening Tuesday’s trading session with significant losses but found strong support at $3,951. The yellow metal is currently seeking to hold above the daily pivot point of $4,017, heading for resistance levels at $4,072 then $4,120. On the downside, if the price falls below the aforesaid pivot point, it could retreat toward support levels near $3,951 then $3,901.
Global markets remained focused on geopolitical and energy developments on Tuesday as investors monitored the possibility of renewed Iran-U.S. talks in Doha, while concerns over the global oil market intensified after Morgan Stanley warned of a potential supply surplus. At the same time, the U.S. Dollar Index continued to hover near a 13-month high, supported by expectations that the Federal Reserve will maintain a restrictive monetary policy.
Market Watch
Dollar Index Stays Near 13-Month High
The U.S. Dollar Index remained near its highest level in 13 months during Tuesday’s trading, supported by growing market expectations that the Federal Reserve will maintain a restrictive monetary policy amid resilient U.S. economic data and a strong labor market.
The index, which measures the U.S. dollar against a basket of six major currencies, hovered near the 101 level after reaching its highest point since May 2025 last week. Meanwhile, major currencies remained under pressure, particularly the Japanese yen, which fell to its weakest level in nearly four decades against the dollar as the interest rate differential between the United States and Japan continued to widen.
Investors are now awaiting the release of key U.S. economic data later this week, including the Nonfarm Payrolls report and inflation figures, which could provide further clues about the future path of interest rates. Persistent expectations for additional Federal Reserve rate hikes have continued to support the U.S. dollar while weighing on gold and other dollar-denominated assets.
Morgan Stanley Warns of Oil Glut
Morgan Stanley warned that the global oil market could move into a supply surplus in the coming quarters, as it lowered its Brent crude price forecasts for the second time in less than two weeks. The bank cited the faster-than-expected recovery in oil flows through the Strait of Hormuz, resilient U.S. crude production, and weaker demand from China as key factors increasing the risk of oversupply.
The bank now expects Brent crude to average $75 per barrel during the third and fourth quarters of 2026, down from its previous forecasts of $90 and $80 per barrel, respectively. It also revised its 2027 outlook, forecasting Brent to average $75 per barrel in the first half of the year and $70 per barrel in the second half, as market attention gradually shifts from geopolitical supply risks to the prospect of rising global inventories.
Morgan Stanley analysts noted that the resumption of Middle Eastern oil exports, coupled with strong U.S. production and persistently weak Chinese demand, is likely to increase global crude supplies and weigh on oil prices despite ongoing geopolitical risks in the region. The bank added that the market’s focus is shifting from concerns over supply disruptions to the likelihood of an oil supply surplus in 2027.
Markets Focus on Potential Iran-US Talks in Doha
Global markets are closely watching the possibility of talks between Iran and the United States in Doha, as investors hope that any diplomatic breakthrough could help ease geopolitical tensions and ensure the uninterrupted flow of oil through the Strait of Hormuz, one of the world’s most important energy shipping routes. The anticipated discussions come just days after an exchange of attacks between the two sides, which heightened concerns over global energy supplies and weighed on market sentiment.
Negotiating teams from both countries are expected to head to Doha, although uncertainty remains over whether a formal meeting will take place. Tehran has denied that any official talks are scheduled, while the White House has confirmed that U.S. envoys have been dispatched to support mediation efforts. The conflicting statements underscore the fragile nature of the current de-escalation process despite ongoing diplomatic initiatives.
Market analysts believe the outcome of any potential negotiations could have a direct impact on oil prices and broader financial markets. Progress in the talks could reduce geopolitical risk premiums and ease concerns over global crude supplies, while a failure to reach common ground could trigger renewed market volatility and support higher energy prices.
Looking Ahead
Markets are awaiting the release of the U.S. Consumer Confidence Index later today for fresh insights into the health of the U.S. economy and the outlook for consumer spending. The data will be closely watched by investors for clues on economic momentum and its potential impact on the Federal Reserve’s monetary policy path, with stronger-than-expected readings likely to support the U.S. dollar and Treasury yields, while weaker figures could reinforce expectations of a more accommodative policy stance.