Gold clawed back above $4,500 on Friday, closing at $4,569.90 with a 1.57 percent gain after the latest US inflation data delivered no nasty surprises. The PCE price index — the Federal Reserve’s preferred inflation gauge — rose exactly by the 3.8 percent that economists had penciled in, allowing Treasury yields to ease slightly and removing some pressure from the non-yielding metal. The weekly performance turned positive, up just over one percent, but the broader picture reveals a market deeply divided between robust physical demand and persistent paper fund outflows.
Under the surface, ETF investors have been heading for the exits. The world’s largest gold-backed ETF, SPDR Gold Shares, shed another two tonnes in the week to May 27, bringing its holdings to 1,034.85 tonnes. Outflows from the fund totaled $290 million over the past five trading sessions alone, pushing year-to-date redemptions to $5.2 billion. The selling has tracked gold’s retreat from its January all-time high of $5,589, a level it now sits roughly 16 percent below. Yet central banks are telling a completely different story.
China’s central bank bought more than eight tonnes of gold in April, extending its purchasing streak to 18 consecutive months and pushing total reserves to around 2,322 tonnes. Goldman Sachs expects central bank buying to average 60 tonnes a month through 2026, building on a first quarter that saw global central bank purchases hit 244 tonnes. Overall gold demand for the first quarter reached 1,231 tonnes, valued at a record $193 billion — 74 percent more than the same period a year earlier. Bar and coin demand jumped 42 percent to 474 tonnes, highlighting a deepening divide between institutional paper flows and private physical appetite.
Inflation remains the wild card that ties these two worlds together. US consumer prices accelerated to 3.8 percent in April, the highest since May 2023, driven by an energy shock that exceeded the 3.7 percent consensus. That has forced traders to scrap any remaining expectations for rate cuts this year. Higher for longer keeps bond yields elevated — the ten-year Treasury yield is hovering around 4.6 percent — raising the opportunity cost of holding gold. The appointment of a new Federal Reserve chair perceived as hawkish had already strengthened the dollar, compounding headwinds for the metal.
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Geopolitical developments have provided some counterweight. Diplomatic progress between the US and Iran has raised the possibility of extending the truce at the Strait of Hormuz, lowering risk premiums on energy commodities. Dovish oil price expectations dampen overall inflation fears, indirectly supporting gold. The metal successfully defended chart support at $4,400, and the relative strength index sits near 50 — neutral territory with no overbought signals.
On the upside, gold faces resistance at $4,580 and $4,650, with the 50-day moving average at $4,639 providing a near-term cap. A sustained break below $4,500 would bring the 200-day moving average into play as the next major support; analyst house Incrementum sees a volatile consolidation between $4,500 and $4,950 for early summer, with downside targets around $3,500 if the longer-term trendline breaks. Conversely, the market’s ability to hold $4,400 gives chart watchers a base to work from.
The next major test comes on June 5, when the US government releases the May non-farm payrolls report. Weaker employment figures could revive rate-cut speculation and give gold fresh upward momentum, while a robust jobs print would keep the pressure on. The metal closed the week with breathing room — roughly 16 percent below its January record — and plenty of scope to move in either direction once the data lands. For now, the duel between central bank accumulation and ETF liquidation keeps the price locked in a narrow corridor, with physical demand providing a floor that paper sellers have yet to break through.
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