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The conventional wisdom that gold thrives on geopolitical turmoil has taken a beating in 2026. Rather than rallying on conflict in the Middle East, the yellow metal has been dragged lower as Iran tensions push oil prices and the dollar higher, reinforcing the Federal Reserve’s resolve to keep rates elevated. The latest leg of this paradox played out this week when gold hit a two-month low near $4,390 after US military strikes on Iranian bases, only to claw back to $4,596.60 by Friday’s close as tentative ceasefire hopes briefly weakened the greenback.
Underneath the daily noise, a very different story is unfolding in the official sector. Central banks bought 244 metric tons of gold in the first quarter, according to the World Gold Council, with China purchasing 8 tons in April alone — its strongest monthly intake since December 2024 and a streak that now extends 18 months. Poland, Uzbekistan and Ghana have also been adding to reserves, a trend that took off in earnest after the freezing of $300 billion in Russian central bank assets in 2022. Turkey, a heavy buyer last year, bucked the pattern by selling 8.1 tons in January-February to support the lira and cap local demand.
Traders, meanwhile, are getting a helping hand from the exchange. The CME lowered initial margin requirements for COMEX-100 gold futures for the second time in two months, effective May 29. Standard profiles dropped from 6% to 5%, while risk-based profiles fell from 6.6% to 5.5%. Lower margins tie up less capital per contract and can stir up speculative activity without touching physical flows.
The macro picture remains the biggest headwind. The Bureau of Economic Analysis reported April’s PCE price index running at 3.8% year-over-year, with the core gauge at 3.3%. That keeps the Fed locked in a restrictive stance — the CME FedWatch tool sees zero rate cuts in 2026 as the most probable scenario — and raises the opportunity cost of holding a zero-yield asset. The effect is compounded by oil: every spike in crude feeds inflation expectations and strengthens the dollar, which in turn makes gold more expensive for non-dollar buyers.
Physical demand in key Asian markets offers little relief. Indian buyers are sitting on their hands because of high domestic prices and import duties, while Chinese premiums have narrowed as caution takes hold.
On the charts, gold closed Friday at $4,596.60, up 1.5% on the day and roughly 1.1% above where it traded a month ago. That leaves it about 16% below the 52-week high of $5,450. The 50-day moving average at $4,641 is the immediate resistance; the relative strength index sits at 49.8, squarely in neutral territory. A sustained push above the 200-day line would provide the first technical confirmation that the bounce from Thursday’s low has legs.
Wall Street’s year-end targets remain wide apart. Morgan Stanley recently trimmed its forecast to $5,200, while J.P. Morgan holds at $6,300. Goldman Sachs remains at $5,400, pointing to the structural shift in central bank reserve management away from the dollar — a view backed by its own survey in which 70% of central banks expect global gold reserves to rise over the next twelve months. The Reuters quarterly poll from April put the average at $4,916. The main downside risks are a more hawkish Fed, sustained dollar strength, slower official sector buying and an unexpected geopolitical de-escalation that removes the last vestiges of risk premium.
On the supply side, China’s gold production slipped in the first quarter after safety inspections forced some smelters to halt operations.
The tug-of-war now pits secular demand from reserve managers against cyclical pressures from energy-led inflation and a stubbornly restrictive central bank. The next few weeks will show whether gold can hold the $4,400 floor and build on its recovery, or whether the combination of Iran and the Fed proves too heavy even for the official sector’s buying machine.
When the US military struck Iranian-linked targets near the Strait of Hormuz this week, the textbook safe-haven trade would have been to pile into precious metals. Instead, the exact opposite occurred. Silver tumbled to a three-week low of $71.81 per ounce on Thursday, settling around $73.20 — a decline of roughly 1.5%. By the close, the metal was changing hands at $73.34, down 1.7% on the session.
The culprit wasn’t a lack of geopolitical tension, but the specific channel it activated. The airstrikes, which Washington said were aimed at a facility threatening shipping in the vital waterway, sent crude oil prices surging roughly 2% in early trade. Higher energy costs rekindle inflation fears, which in turn reinforce expectations that the Federal Reserve will keep interest rates elevated for longer. For a non-yielding asset like silver, that calculus is deeply damaging.
The dollar seized on the narrative. The US Dollar Index climbed to 99.288 — its highest since May 22 and near the week’s peak — making silver more expensive for overseas buyers. Fed Governor Lisa Cook added to the pressure by signaling that the central bank should hold rates steady for now, while not ruling out further hikes given tariffs, the Iran conflict, and AI-driven investment. Vice Chair Philip Jefferson echoed the view, calling the current policy stance appropriate as long as inflation risks persist. The dollar’s strength crystallized a dilemma: instead of serving as a crisis hedge, silver got caught in the crossfire of an energy-driven inflation scare.
That dynamic played out across the precious metals complex, but silver took the hardest hit. Gold slipped 0.8%, platinum lost 0.5%, and palladium shed 0.7%. The message was clear: geopolitics does not automatically boost bullion. What matters is which transmission mechanism the crisis opens. This time, the oil-inflation-Fed channel was wide open.
Beneath the short-term noise, the physical market tells a starkly different story. The World Silver Survey 2026 projects the sixth consecutive deficit year, with a supply gap of 46.3 million ounces — 15% wider than the previous year. Above-ground inventories have fallen by a cumulative 762 million ounces since 2021, providing long-term price support. Yet the industrial side is cooling: semiconductor and AI-related silver consumption is growing, but a sluggish photovoltaic sector is dragging overall demand. Analysts expect industrial offtake to dip roughly 3% in 2026 to about 639.6 million ounces.
Chartists see further downside risk after silver broke below $74, triggering technical selling that sliced through both the 50-day and 100-day moving averages. The Relative Strength Index now sits below 50, keeping the bears in control. Immediate support lies at $71.22; if that fails, the psychologically important $70 level comes into focus. On the upside, $75 represents the first resistance, followed by the $76 zone.
All eyes now turn to Friday’s US PCE inflation data, the Fed’s preferred gauge. A hotter-than-expected reading would further slash the odds of near-term rate cuts and heap additional pressure on silver. Meanwhile, the Hormuz negotiations remain unresolved — Iran is demanding a tolling system for the strait, while Washington insists on the removal of highly enriched uranium from Iranian soil. Until clear progress emerges, every fresh energy price spike poses another headwind for the metal.
A curious contradiction is playing out in the commodities market. The US military struck Iranian positions near the Strait of Hormuz, a tanker came under fire, and oil prices shot up around 2%. Yet gold, the traditional haven, took a sharp knock — sliding 1.47% on Thursday to $4,422 an ounce, with a intraday low of $4,397.86, its weakest in nearly two months.
The selling looks counterintuitive, but the logic is brutally straightforward: escalating energy costs fan inflation fears, and that keeps the Federal Reserve on a hawkish path. Higher oil prices feed into broader price pressures, strengthening the case for the Fed to hold rates elevated — or even raise them further. For a non-yielding asset like gold, that’s a direct hit to its appeal.
Fed officials drove the point home on Thursday. Neel Kashkari stressed that inflation control remains the singular focus. Lisa Cook said rates should stay steady for now and did not rule out additional tightening. Philip Jefferson judged current policy to be appropriate. Their collective message: no pivot in sight. With real yields on Treasuries still attractive, the opportunity cost of holding bullion has become punishing.
The dollar added to the pressure. The geopolitical shock triggered a flight into the greenback, making gold more expensive for buyers outside the dollar zone. That suppressed the safe-haven reflex that typically accompanies such crises. Gold now sits roughly 18% below its 52-week high of $5,450, reached in January. While it still stands 42% higher year-on-year — from $3,335 — the current pullback shows that its crisis-hedge credentials have limits.
The weakness is spreading across the precious metals complex. Silver lost 1.7% to $73.34, platinum fell 0.5%, and palladium declined 0.7%. The S&P GSCI Precious Metals Index, at around 5,962 points, has shed over 3.2% year-to-date. The message is clear: macro forces and dollar strength, not physical demand, are calling the shots.
The next test arrives later on Thursday with the release of PCE data — the Fed’s preferred inflation gauge. A hotter-than-expected reading would further dim hopes for rate cuts and likely give the dollar another lift, a bearish scenario for gold. A softer print, on the other hand, could quickly turn sentiment. The metal has been trading in a tight $4,400–$4,600 channel for roughly ten days; the PCE numbers may determine which side of that range gives way.
Any fresh disruption to shipping through the Strait of Hormuz — through which about a fifth of global oil and LNG shipments pass — could amplify the rate-driven headwind. For gold to reclaim its safe-haven mantle, either the Fed would need to blink, or oil prices would have to stop feeding into rate expectations. Right now, neither appears likely.
Gold is locked in a multi-front battle that has kept it oscillating in a narrow range, with the metal changing hands at $4,481 an ounce on Thursday — 18% below its January peak of $5,450 and roughly 3.5% beneath its 50-day moving average of $4,643. The week’s macroeconomic data dump, headlined by the first-quarter GDP revision and the April PCE price index, could break the deadlock.
The preliminary GDP reading of 2.0% annualized growth already missed the 2.3% Wall Street consensus. Any upward revision to the PCE deflator within today’s second estimate would harden the stagflation thesis — a combination of slowing expansion and sticky price pressures that historically has been a powerful tailwind for bullion. Consumer inflation hit 3.8% year-on-year in April, the hottest pace since mid-2023, with core services inflation accelerating to 0.4% month-on-month from 0.1% in the prior quarter.
Yet that same inflation data is also fueling expectations of tighter monetary policy. CME FedWatch data shows a 67% probability that the Federal Reserve will not cut rates further this year, and a 47.4% chance of a rate increase by year-end; the odds of a 25-basis-point hike specifically in December have risen to 51%. With the fed funds rate stuck at 3.5% to 3.75%, non-yielding gold loses appeal as interest rate expectations climb.
The dollar is amplifying the headwind. The DXY index holds above 99, making dollar-denominated bullion more expensive for overseas buyers. The Conference Board’s consumer confidence index slipped 0.7 points to 93.1 in May, with the present situation component dropping 3.2 points to 121.2 — a decline that reflects persistent price and energy concerns. While weak sentiment alone could support gold, when combined with rising inflation anxiety it tends to strengthen the case for a more hawkish Fed, muting any safe-haven lift.
Geopolitical tension adds another layer of complexity. Iran on Tuesday accused the United States of violating a ceasefire near the Strait of Hormuz, a flashpoint that would normally drive haven flows. This time, however, the same conflict is pushing oil prices higher and stoking inflation expectations, which in turn reinforces rate-hike bets — effectively neutralizing the geopolitical bid for gold.
On the demand side, a tariff shock from India is set to remove meaningful buying pressure. On May 13, New Delhi raised import duties on gold from 6% to 15%, splitting the increase between the basic duty (5% to 10%) and the agricultural infrastructure cess (1% to 5%). The move came after April imports surged 82% year-on-year to $5.62 billion, crushing the rupee, which has dropped more than 7% since January. The World Gold Council expects the tariff to slash Indian jewelry and bar demand by 50 to 60 tonnes this year, a decline of roughly 10%.
Offsetting that weakness is unprecedented buying from official institutions. Global gold demand reached $193 billion in the first quarter of 2026, a 74% surge year-on-year, according to the World Gold Council. Central banks added a net 244 tonnes to their reserves. Chinese bar and coin demand jumped 67% to a record 207 tonnes, while the People’s Bank of China’s holdings hit an all-time high of approximately 2,309 tonnes. Since 2022, central banks have been acquiring roughly 1,000 tonnes of gold annually — about five times the average pace of the previous decade.
This structural support has kept major banks bullish despite the recent pullback. J.P. Morgan maintains a year-end target of $6,000 an ounce, Goldman Sachs sees $5,400, and ANZ forecasts $5,600. But before any of those levels come into play, gold must first find a catalyst. Thursday’s twin releases — the GDP revision and the PCE price index, both at 8:30 a.m. Eastern Time — will provide the next directional signal. A strong inflation print would deepen gold’s slide; a softer one could reignite the growth-scared bid that had traders piling into bullion earlier in the year.
Silver is heading into its sixth consecutive year of supply shortfalls, yet the metal can’t seem to catch a bid. On Wednesday, XAG/USD traded around $75.20 an ounce in European hours, recovering modestly from a near-two-week low of $73.10 hit the previous day. But the bounce looks fragile as two powerful forces—a hawkish Federal Reserve and a sharply revised deficit forecast from UBS—combine to cap upside momentum.
The latest wrench came from the Fed minutes released on May 20, which laid bare the central bank’s reluctance to ease. The policy rate was left unchanged at 3.50%–3.75%, but a majority of participants signaled that further tightening would be appropriate if inflation remains stubbornly above the 2% target. Many officials also wanted to remove language the market had interpreted as a dovish signal. For a non-yielding asset like silver, higher interest rates are a direct headwind, making bonds more competitive. The 10-year US Treasury yield surged to 4.69%—the highest in over a year—while the 30-year yield climbed to 5.2%. At the same time, the US dollar index hit a six-week high of 99.47, further discouraging buyers outside the dollar bloc.
Adding to the macro pressure, UBS delivered a sobering reassessment of the supply-demand balance. The Swiss bank slashed its year-end 2026 price target from $85 to $80 per ounce and cut its second-quarter 2026 estimate even more aggressively, from $100 to $85. But the crucial detail was the deficit revision: UBS now expects the global silver market to post a deficit in the high double-digit millions—roughly 60 to 70 million ounces—down from its previous forecast of 300 million ounces. The bank cited weaker photovoltaic demand, falling purchases of jewelry and silverware, lower investor flows, and slightly higher mine production expected at around 850 million ounces in 2026. The narrative of acute scarcity, which had helped underpin prices, has been significantly dialed back.
That industrial demand engine has been sputtering for some time. According to the World Silver Survey 2026, physical demand from industry dropped 3% in 2025 to 657.4 million ounces, and further erosion to 639.6 million ounces is expected this year. The solar sector is the main drag, as manufacturers reduce silver content per unit or substitute the metal outright. While demand from AI infrastructure, automotive electronics, and power grids remains constructive, it is not enough to offset the decline in photovoltaics. Geopolitical tensions in the Middle East add a layer of complexity: higher energy prices could stoke inflation expectations and push the Fed’s rate path higher, indirectly punishing silver rather than providing a safe-haven bid.
Technically, the chart looks precarious. The relative strength index stands at 31—flirting with oversold territory—and the MACD is negative. After breaking out of its uptrend channel, silver could test support at $71 an ounce. On the upside, resistance is stacked at $76.33 and $78.25, levels that need to be reclaimed to signal a durable stabilization.
For now, the market’s attention is fixated on incoming inflation data, employment figures, and further Fed commentary. The $75 handle acts as a near-term pivot: holding above it keeps the recovery narrative alive, but with yields elevated and the silver deficit story softening, the burden of proof lies firmly on the bulls.