On Wednesday, April 29th, the spot gold price faced downward pressure, fluctuating around $4,550 per ounce. This movement was influenced by inflation concerns stemming from rising energy costs and market expectations regarding the policy paths of major central banks. Brent crude oil prices climbed above $110 per barrel. The US maintained maritime restrictions on an Iranian port, causing shipping disruptions in the Strait of Hormuz and raising the risk of potential oil supply interruptions. The Federal Reserve is expected to hold interest rates steady, with traders focusing on remarks from Chair Powell to assess the economic and monetary policy implications of geopolitical factors. Globally, gold demand in the first quarter showed structural changes, with strong investment demand partially offsetting a decline in jewelry consumption.
Geopolitical factors are driving up energy prices, putting short-term pressure on gold. The US insists its maritime restrictions aim to reduce Iranian oil exports and advance negotiations. Iran maintains it will not resume comprehensive dialogue until the restrictions are lifted. Analysis indicates Iran has limited oil storage capacity. Estimates suggest remaining available storage corresponds to approximately 12 to 22 days of normal production. If storage reaches capacity, it could force a reduction in output, subsequently impacting global supply balance. Consequently, Brent crude prices remain elevated as traders assess the duration of supply disruptions. Rising energy costs directly boost inflation expectations, leading markets to believe this may prompt central banks to maintain higher interest rates for a longer period. A high-interest-rate environment increases the opportunity cost of holding non-yielding assets. The spot gold price has recently retreated from its highs, down approximately 14% since the initial stages of the conflict. Technically, the price briefly fell below a recent support level, triggering further selling pressure from some position unwinding. Nevertheless, gold's role as a traditional safe-haven asset persists. Traders note the divergence between rising oil prices and gold's performance, reflecting that interest rate expectations currently exert a greater influence on gold prices than short-term geopolitical premiums.
Central bank and investment demand underpin gold's medium to long-term outlook. Data from the World Gold Council shows total global gold demand (including over-the-counter transactions) reached approximately 1,231 tonnes in the first quarter of 2026, a 2% year-on-year increase. Purchases of gold bars and coins surged 42% to 474 tonnes, marking the second-highest quarterly level on record. Central bank gold buying also increased by 3%, collectively offsetting a 23% decline in jewelry demand. The total value of demand set a quarterly record due to high price levels. This shift in demand structure indicates that institutions and investors continue to actively allocate to gold even in a high-price environment, reflecting an ongoing diversification strategy. Analysts at Goldman Sachs maintain their year-end gold price target of $5,400 per ounce in a recent report, citing continued diversification purchases by central banks and allocation demand from the private sector as core drivers.
The resilience on the demand side provides a buffer against gold's downside. However, if energy supply shocks persist and bond yields rise further, short-term liquidation pressure could still emerge.
Monetary policy expectations and their dynamic relationship with gold prices are key. The Fed is expected to keep its target range for the federal funds rate unchanged at this meeting. Markets are focused on Chair Powell's comments regarding inflation risks, the economic impact of geopolitical events, and the threshold for future policy adjustments. Rising energy prices may temporarily push inflation readings higher, but traders are assessing the impact of their persistence on the actual path of interest rates. Recent policy decisions from other major institutions like the European Central Bank, the Bank of England, and the Bank of Canada are also under scrutiny. The Bank of Japan previously kept its benchmark interest rate unchanged at 0.75%, with an internal voting split hinting at the possibility of future adjustments. The US Dollar Index showed minor fluctuations, reflecting market pricing of policy divergence.
Gold prices are highly sensitive to interest rates: rising real yields typically diminish gold's appeal. The recent pullback in gold prices partly stems from higher bond yields and reinforced expectations of a "high bar" for Fed intervention. Traders need to monitor subsequent economic data and progress in geopolitical mediation. If signals emerge of the strait reopening, leading to an oil price decline, it could provide a short-term positive catalyst for gold.
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