Gold prices are experiencing renewed volatility, holding comfortably above the $4,600 mark during Friday's Asian session after Thursday's recovery where the precious metal jumped 1.9% to $4,629.83 per ounce after hitting a one-month low. According to latest reports, gold struggles to build on the previous day's move higher and oscillates in a narrow band, with the commodity remaining on track for a second straight weekly decline. The US Dollar steadies following Thursday's slump to a one-and-a-half week low amid geopolitical risks, though the US Federal Reserve's hawkish tilt offers some support to the USD and contributes to capping the non-yielding yellow metal. The Bloomberg Dollar Spot Index, a gauge of the US currency, fell 0.2% after losing 0.8% on Thursday, providing some relief to the safe-haven asset that had been under pressure from rising energy costs and inflation fears. Gold currently trades near $4,560–$4,620 per ounce after slipping from recent highs above $4,600, with resistance holding near $4,640 and support seen around $4,470–$4,500 amid volatile global conditions.
US President Donald Trump has rejected an Iranian proposal to open the Strait of Hormuz and lift the blockade, while postponing nuclear issues to a later stage. Trump further stated that he's going to keep Iran under a naval blockade until the regime agrees to a deal that addresses US concerns about its nuclear program. The energy-supply shock from the nine-week conflict has added to inflation risks, raising the likelihood that central banks will keep rates steady for longer or even hike them, creating headwinds for non-yielding bullion. Latest reports indicate that the US is considering new military strikes on Iran, which fuels worries about a further escalation of tensions between the US and Iran, underpinning the USD's reserve currency status and acting as a headwind for the Gold price. Iran has warned of 'long and painful' strikes on US bases in response to any new attacks.
The US Federal Reserve's hawkish tilt offers some support to the USD and contributes to capping the non-yielding yellow metal, according to latest market analysis. This mixed signal from the Fed creates uncertainty for gold investors, as gold lacks any follow-through buying as bulls seem hesitant amid mixed fundamental cues. The high interest rate environment makes gold less attractive as a non-yielding asset, reducing its appeal compared to yield-bearing investments like U.S. Treasuries. However, gold gained on Thursday as the yen surged the most in three years following reports that the Japanese government had begun intervening in the market, with a weaker greenback tending to boost gold that's priced in the US currency. Market participants are pricing in steady rates at 3.50%–3.75% ahead of Wednesday's Fed decision, while uncertainty over future cuts keeps sentiment mixed and defensive sectors outperforming.
Central banks remain the biggest gold holders, with central banks adding 1,136 tonnes of gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This represents the highest yearly purchase since records began, with central banks from emerging economies such as China, India and Turkey quickly increasing their gold reserves. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy gold to improve the perceived strength of the economy and the currency. High gold reserves can be a source of trust for a country's solvency, making gold an attractive asset for sovereign wealth management.
Despite recent volatility, most analysts remain cautiously optimistic about gold's long-term prospects. Most analysts are still bullish on the precious metal, with the latest data by the producer-funded World Gold Council showing that central banks added gold holdings in the first quarter at the fastest pace in more than a year. UBS analyst Giovanni Staunovo maintains a positive outlook for the next six to twelve months, citing uncertainty surrounding upcoming midterm elections and expectations of a weaker U.S. Dollar as potential support factors. As noted by market analysts, 'There's not a ton of conviction around the near-term trajectory, even if the medium-term bull story, which we agree with, is still broadly consensus'. He emphasized that a clear de-escalation in the Middle East and an accompanying dip in interest rate expectations and the dollar would mean 'it's game-on again for gold'. Gold remains volatile amid rising U.S. yields and a stronger dollar, while resistance holds near $4,640 and support is seen around $4,470–$4,500.
