The precious metals market is grappling with a rare disconnect this week. Gold is trading at roughly $4,724 an ounce, nursing a 10% decline since the Strait of Hormuz crisis erupted, even as the geopolitical turmoil that would normally send investors scrambling for safe havens rages on. The culprit? Surging energy prices that are fanning inflation fears and keeping the Federal Reserve on a hawkish footing.
A Power Vacuum at the Fed Adds to the Uncertainty
The Federal Open Market Committee is set to meet on April 28-29, and this gathering carries unusual weight. It will be Jerome Powell’s final meeting as Fed chair, with Kevin Warsh slated to take over on May 15 — at least in theory. Senator Thom Tillis has blocked Warsh’s nomination in committee, demanding the Justice Department drop a criminal investigation into Powell before he will allow a vote. The Senate is on recess the week of May 4, meaning a confirmation vote couldn’t happen until at least May 11, just four days before Powell’s term expires.
For gold, this institutional limbo creates a peculiar dynamic. Real yields become harder to price when the institution setting them is in a state of suspended animation. Markets are left guessing about the policy direction under a new chair who may or may not be confirmed in time.
The Rate Decision That Isn’t Coming
One thing is virtually certain: there will be no change to interest rates on April 29. The CME FedWatch Tool puts the probability of a hold at 99.5%. The real focus will be on the forward guidance. The University of Michigan’s preliminary inflation expectations for April jumped to 4.8%, a full percentage point above March — the sharpest monthly increase in a year.
The Fed finds itself in a classic bind. Inflation is running well above the 2% target, yet the economy is showing signs of strain from elevated energy costs. Markets will be listening closely for any hint from Powell that rate cuts could be on the table if oil prices retreat. If the language remains firmly patient, gold’s upside potential will stay capped.
Hormuz: The Engine Driving the Divergence
The Strait of Hormuz remains the dominant short-term catalyst across commodity markets. Tehran continues to assert control over the waterway and reportedly fired on commercial vessels again this week. The US maintains its blockade of Iranian ports in response. For gold, the mechanism is straightforward: higher energy prices stoke inflation, the Fed stays restrictive, and non-yielding assets lose their appeal.
Should investors sell immediately? Or is it worth buying Gold?
Gold hit its 52-week high of $5,450 in late January. Since the Hormuz conflict began, it has shed roughly 13% from that peak, though it still shows a year-to-date gain of about 9%. The metal is now trading well below its January peak, caught between the gravitational pull of geopolitical risk and the headwind of a dollar strengthened by rising rate expectations.
Institutional Demand Provides a Floor
Beneath the short-term noise, central bank buying continues to offer structural support. January purchases came in at just five tonnes, well below the 2025 monthly average of 27 tonnes, according to the World Gold Council. But the geographic base broadened: Malaysia and South Korea resumed gold buying after prolonged pauses, while China continued to build its reserves. Uzbekistan was the largest single buyer, while Russia’s central bank sold nine tonnes.
Goldman Sachs sees medium-term upside to $5,400, citing central bank purchases and low speculative positioning. Wells Fargo has gone further, lifting its long-term target to $8,000 on the back of de-dollarization efforts by multiple central banks. But these bullish calls are being tested by the immediate reality of a Fed that cannot ease while oil prices remain elevated.
The Path Forward Hinges on One Waterway
A credible reopening of the Strait of Hormuz would relieve pressure on oil prices, cool inflation expectations, and remove the biggest lid on gold’s price. Until that happens, the metal remains trapped in its current range, pulled in opposite directions by the same geopolitical crisis that should, in theory, be its greatest ally.
The coming days bring two key events: the FOMC meeting on April 28-29, which will signal how seriously the Fed views energy-driven inflation risks, and the release of US first-quarter GDP data. For gold, every headline from the Hormuz region will matter more than any central bank forecast.
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