Gold’s traditional safe-haven appeal has been all but silenced this week as investors fixate on a toxic mix of persistent US inflation and dwindling appetite from one of the world’s largest buyers. The yellow metal slid more than 1% in early Monday trading to around $4,500 per ounce, even as a drone strike on the Barakah nuclear plant in Abu Dhabi and a de facto blockade of the Strait of Hormuz sent oil prices surging above $100 a barrel.
The core of the problem lies in soaring input costs. US energy prices jumped nearly 18% year-on-year in April, helping to push the headline consumer price index to 3.8% and the producer price index to a staggering 6% — the highest since early 2023. Those figures have all but dashed hopes that the Federal Reserve might ease policy anytime soon. With the yield on 10-year Treasuries climbing to 4.54%, gold’s lack of a coupon becomes a glaring disadvantage. A rate hike later this year is now back on the table as a realistic scenario.
Compounding the macro pressure, physical demand from Asia is showing cracks. In India, Prime Minister Narendra Modi has publicly urged citizens to refrain from fresh gold purchases in an effort to shore up the rupee and contain the trade deficit. Higher import taxes on bullion have added an extra hurdle. Chinese buyers, after a long rally, are also consolidating — speculative positions have been trimmed, sapping momentum from the world’s two largest gold-consuming nations.
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The geopolitical drama in the Middle East, rather than boosting bullion directly, is actually feeding into the inflation narrative. Expensive energy threatens to keep price pressures elevated for longer, reinforcing the central bank’s hawkish stance. Oil held above the $100 mark as Saudi Arabia intercepted additional projectiles, and the Strait of Hormuz remained effectively shut over the weekend. Markets now fear a prolonged disruption that could tighten supplies further, a dynamic that works against gold.
Technically, the metal is losing its footing. Friday’s close of $4,555.80 left it 4.00% lower on the week and 6.21% lower over the past 30 days. It now sits below its 50-day moving average of $4,728.38, a short-term level that had served as a key support. Year-to-date gains remain positive at 4.93%, but the prior uptrend appears bruised. The zone around the current level will be critical: if prices can defend it and inch back toward the moving average, some relief may follow.
Looking ahead, the combination of macro data and geopolitics leaves little room for error. The Federal Open Market Committee’s minutes and the University of Michigan inflation expectations survey, both due this week, will help shape the near-term path. The White House is also reportedly weighing military options on Tuesday, adding another layer of uncertainty. For gold to reclaim its safe-haven crown, the market needs either a decisive easing in inflation fears — or a physical demand shock that outweighs the interest-rate headwind. Neither looks imminent.
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