Gold closed Tuesday at $4,508.10, nursing a 4.04% loss over the past month and a marginal 0.51% decline on the week. The metal’s short-term bounce on a softer dollar proved brittle, barely registering against a backdrop that has turned the usual geopolitical playbook on its head.
The oddity is unmistakable: military escalation that would normally ignite a flight to safety is instead weighing on gold. New US strikes on Iranian targets near the Strait of Hormuz — including what Washington described as mine-laying boats and rocket positions — pushed the metal more than 1% lower on Tuesday, even as the greenback slipped. Iran condemned the attacks as a violation of a ceasefire, while Secretary of State Marco Rubio acknowledged that an agreement to end the conflict could still be “several days” away.
The mechanism behind this inversion runs through oil and inflation. Any disruption to flows via the Strait of Hormuz drives crude prices higher, stoking inflation expectations. That, in turn, reinforces the case for the Federal Reserve to keep rates elevated — or even raise them again later this year. For a non-yielding asset, rising rate expectations are a powerful headwind, one that currently overpowers the metal’s traditional safe-haven appeal.
A fragile support from the dollar
Tuesday’s Conference Board data gave gold a brief tailwind: consumer confidence slipped 0.7 points to 93.1 in May, while the Present Situation Index dropped 3.2 points to 121.2. Weaker sentiment can dent the dollar, making gold cheaper for overseas buyers. But the relief is fleeting. The same data points that soften the dollar also fan recession worries, which feed back into rate expectations and ultimately cap any rally.
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The market’s sensitivity to the macro mix is evident in the technicals. Gold now trades 3.05% below its 50-day moving average of $4,649.76. The relative strength index sits at 49.8 — dead center, signaling neither exuberance nor panic. Year-to-date, the metal is still up 3.83%, and it remains 14.38% above its 52-week low. But those numbers mask a stalled trajectory: short-term dollar support, medium-term rate resistance.
Hormuz: a double-edged sword for gold
Negotiations are reportedly exploring a framework under which the Strait could reopen roughly 30 days after a formal accord, with Iran clearing mines to allow free passage. For gold, a diplomatic breakthrough would cut both ways. Lower oil prices would ease inflation fears and reduce rate-hike pressure — a positive. But a winding down of geopolitical tensions would also erode the safety premium that has kept a floor under prices. The market is caught between two opposing forces, unable to price which will dominate.
April’s ETF data offers one stabilizing pillar. Global gold-backed ETFs added 45 tonnes, pushing total holdings to 4,137 tonnes and assets under management to $615 billion. Europe led the inflows. That institutional demand has persisted even as daily trading volumes shrank 24% in April to an average of $398 billion — still above the 2025 year-to-date average.
What breaks the stalemate
Gold is locked in a waiting game. Until a credible timeline for de-escalation in the Strait of Hormuz becomes clear, every rally will be vulnerable to the next twist in rate expectations. The RSI near 50 confirms the market is in neutral — a no-man’s land where only a decisive shift in either the inflation trajectory or the diplomatic calendar can trigger a clear move. For now, the metal’s traditional crisis premium has been overwhelmed by the very dynamics that crisis itself has set in motion.
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