Bullion’s recent retreat below the $4,100 threshold has laid bare a rare anomaly in the precious metals market: a major Middle Eastern conflict and a historic central-bank buying spree have failed to generate the customary safe-haven bid. Instead, gold finds itself squeezed between a hawkish Federal Reserve and an energy-price shock that is reshaping the inflation narrative.
Spot gold tumbled 1.2 percent in early trade on July 13 to touch $4,070 an ounce, well below the $4,127.60 close registered the previous Friday. The weekly loss stands at 1.18 percent, the monthly decline at 2.64 percent, and the year-to-date slide at 4.93 percent. At its current level, the metal is 5.45 percent beneath its 50-day moving average of $4,365.48 and 9.07 percent below the 200-day average of $4,539, while the distance to the 52-week high of $5,626.80 reached in January has widened to 26.64 percent.
The trigger for the latest leg lower is a weekend military escalation between the United States and Iran that centered on the Strait of Hormuz. Fresh missile attacks prompted Tehran to threaten a temporary closure of the strategic waterway, drawing a swift response from the US Central Command to protect shipping. Yet instead of driving capital into gold, the crisis has boosted crude oil by 4 to 5 percent, igniting fears that higher energy costs will keep inflation sticky and force the Federal Reserve to maintain—or even tighten—its monetary stance.
Traders now assign a roughly 63 percent probability to a rate hike at the September meeting of the Federal Open Market Committee, a sharp jump from the previous week. Minutes from the Fed’s June gathering showed that several policymakers already favored a move, though the committee ultimately held the federal funds rate steady. The combination of elevated rate expectations and a stronger dollar—itself lifted by rising bond yields—has sapped gold’s appeal, since the metal offers no coupon and becomes more expensive for non-dollar buyers.
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The same forces are also visible in the flow of institutional capital. Exchange-traded funds backed by bullion have experienced net outflows estimated in the billions of dollars this quarter, as money managers rotate toward yield-bearing assets. That stands in stark contrast to the physical market, where central banks are accumulating gold at an unprecedented clip. China’s People’s Bank added roughly 480,000 fine ounces in June, marking the 20th consecutive month of purchases and the largest single-month addition since October 2023. Poland remains the most active buyer globally in 2025, followed by Uzbekistan with 16.5 tonnes and Kazakhstan with 6.5 tonnes; the Czech Republic has also chipped in 3.4 tonnes this year.
A survey by the World Gold Council of 74 central banks found that 45 percent intend to boost their gold reserves over the next twelve months, the highest reading since the survey began in 2018. Only one institution plans to reduce its holdings. The rationale cited by reserve managers includes geopolitical uncertainty, portfolio diversification, and a gradual move away from dollar-denominated assets—three-quarters of respondents expect the greenback’s share of global reserves to shrink further.
That structural support, however, has so far been insufficient to offset the short-term headwinds from monetary policy. Technically, the relative strength index sits near 44, indicating selling pressure without reaching oversold territory. Key support rests in the $3,940–$4,040 zone—little more than 5.8 percent above the 52-week low of $3,901.30 from October. Bullion dipped to $3,942 in June before forming a higher low at $4,021, which some chartists interpret as a tentative stabilisation signal, though the overarching trend remains bearish.
Investors will now focus on the July 14 congressional testimony of Kevin Warsh, the designated Fed chair, whose comments could clarify how the central bank plans to navigate the simultaneous threats of an energy-price shock and heightened geopolitical risk. If the $4,000 level holds, the sell-off may calm for now; a decisive break below it would open the door to a retest of $3,940. Until then, gold’s paradox—soaring central-bank appetite meets relentless rate worries—looks set to persist.
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