Institutional investors remain optimistic about long-term support for gold, even as prices continue to decline amid stalled Middle East tensions. On April 29, international gold prices experienced another sharp drop, with the spot price of London gold falling below the key level of $4,600 per ounce, reaching an intraday low of $4,564.
On the macroeconomic front, recent reports indicate that the United States and Iran remain at odds over issues concerning the Strait of Hormuz, with negotiations still unresolved and significant disagreements persisting on key nuclear-related topics, leading to a prolonged stalemate.
Shenyin & Wanguo Futures analysis suggests that the outlook for U.S.-Iran talks remains uncertain. Elevated oil prices are likely to keep inflation high in the near term, putting pressure on expectations for Federal Reserve interest rate cuts and leaving precious metals without strong short-term upward momentum. However, given weak U.S. domestic demand and ongoing risks in the labor market, expectations for rate cuts in the second half of the year may revive as geopolitical tensions gradually ease.
The prolonged conflict involving the U.S., Israel, and Iran, coupled with fading rate-cut expectations, continues to influence markets. More than 60 days since the outbreak of hostilities, temporary cease-fire agreements have done little to halt ongoing strategic maneuvering among involved parties.
During this period, disruptions in the Strait of Hormuz have driven oil prices higher, with WTI crude futures briefly surpassing $119 per barrel. Soaring energy costs have raised prices across production, transportation, and consumption sectors. The World Bank has warned that even if the most severe supply disruptions end by May, energy prices could still surge by 24% by 2026, reaching levels not seen since the Russia-Ukraine conflict.
Persistently high inflation has further dampened market expectations for Fed rate cuts. Preliminary U.S. first-quarter core PCE data surged to 3.5%–3.7%, well above the 2% policy target. According to CME FedWatch data, the probability that the Fed will keep rates unchanged in April is 100%, while the cumulative probability of a rate cut by June stands at just 2.6%.
Market analysts note that the recent decline in gold prices reflects a shift from safe-haven driven demand to inflation-driven repricing amid ongoing Middle East conflicts. Rising oil prices have increased real interest rate expectations, reducing gold's appeal. This does not indicate a failure of gold's safe-haven attributes but rather a structural market adjustment due to overlapping short-term macroeconomic factors.
In terms of capital flows, recent data from the U.S. Commodity Futures Trading Commission (CFTC) show continued long-short positioning battles. As of the week ending April 21, COMEX gold futures reported long positions increased by 0.94% to 313,619 contracts, while short positions also rose by 0.94% to 352,553 contracts. Non-commercial net long positions increased by 1,480 contracts to 164,006, accounting for 44.8% of the total.
Dongwu Futures expects precious metals to trend lower in a volatile manner. The diplomatic stalemate in the U.S.-Israel-Iran conflict, persistently high oil prices fueling inflation concerns, and the likelihood that the upcoming Fed policy meeting will maintain current rates are all weighing on gold and silver prices. Market sentiment remains cautious ahead of Fed Chair Powell's final press conference and further clarity on the Iran situation.
Amid short-term price fluctuations, institutions continue to express confidence in long-term gold price support. The World Gold Council's latest Q1 2026 Global Gold Demand Trends Report indicates that despite high prices, global gold demand has not been eliminated but restructured.
The report shows that total global gold demand, including over-the-counter transactions, reached 1,231 metric tons in the first quarter, a slight 2% year-on-year increase. Although demand growth was modest, the total value surged to a record $193 billion, up 74% from the previous year.
Investment demand has become the core driver supporting the market. Boosted by high prices and safe-haven demand, global bar and coin investment surged 42% year-on-year to 474 metric tons. Demand in China jumped 67% to 207 metric tons, setting a new quarterly record. Physical gold investment also showed strong growth in Asian markets such as India, South Korea, and Japan, as well as in Europe and the United States.
Global physical gold ETFs maintained net inflows in the first quarter, with holdings increasing by 62 metric tons. Asian investors were the main buyers, offsetting minor outflows in European and American markets. However, high gold prices led to a 23% year-on-year decline in global jewelry consumption, which fell to 300 metric tons.
Additionally, continued gold purchases by global central banks provide solid support for the gold market. Net central bank buying reached 244 metric tons in the first quarter, up 3% year-on-year and above the five-year average. Although a few official institutions have reduced holdings, the overall trend of central bank accumulation remains intact.
Louise Street, Senior Market Analyst at the World Gold Council, noted that geopolitical risk premiums will continue to support gold investment demand. However, if high interest rates persist longer, investment interest in gold among European and American investors may decline. Future attention should focus on potential supply-side variables related to energy shortages.
Returning to the question most relevant to investors: with gold prices now around $4,575 per ounce, is it time to enter the market?
Analysts further explain that current international gold prices have retreated nearly 19% from the historical high of $5,600 reached earlier this year, indicating some release of speculative泡沫. In the medium to long term, the tendency of Asian investors to buy on dips, the strategic persistence of central bank gold purchases, and the resilience of jewelry consumption in value terms collectively underpin gold demand. Should U.S.-Iran negotiations achieve a breakthrough or the Fed signal a more dovish stance, a rebound in gold may follow. Until then, waiting for the FOMC statement may be a more prudent approach than rushing to buy the dip.
Dongwu Futures also advises investors to closely monitor developments in the Middle East, the upcoming Fed policy meeting, and U.S. PCE data this week. With an extended holiday approaching, investors should strengthen risk management to guard against potential overseas market volatility affecting post-holiday positions.
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