The price of gold has closed lower for a third consecutive week, marking its most sustained period of decline since March 2020. Rather than serving as a reliable safe haven, the precious metal is facing a confluence of pressures from a strengthening US dollar, rising interest rate expectations, and an uncertain policy path from the US Federal Reserve.
Physical Demand Tells a Different Story
A notable divergence is emerging between paper and physical gold markets. While the spot price has retreated, premiums for physical bullion have increased. The spread for Krugerrand coins, for instance, reached a seven-week high, averaging 7.43%. This suggests sustained appetite for tangible metal persists even as futures and ETF markets correct.
Major institutional firms are maintaining their long-term bullish outlooks despite the recent weakness. Analysts at JP Morgan, UBS, and BNP Paribas largely view the current pullback as a technical correction rather than a fundamental trend reversal. UBS has a price target of $6,200 by mid-2026, while BNP Paribas forecasts $6,000 by the end of this year. Furthermore, central banks from emerging markets continue to be net buyers, according to source data.
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Powell’s Dilemma: Inflation Versus Growth
Federal Reserve Chair Jerome Powell’s recent remarks at Harvard University were closely scrutinized by markets. He underscored the central bank’s current bind, acknowledging the extreme difficulty of simultaneously pursuing price stability and protecting economic growth. His reiterated commitment to sustainably bringing inflation down to the 2% target further dampened market hopes for imminent interest rate cuts.
Since the onset of the Iran conflict, market expectations have shifted dramatically. Traders are now pricing in roughly a one-third probability of a rate increase by year-end, compared to previous expectations for cuts. The current Fed funds target rate stands between 3.50% and 3.75%. Higher interest rates increase the opportunity cost of holding non-yielding assets like gold, which helps explain the metal’s approximately 16% drop from its recent record peak.
April’s Direction Hinges on US Labor Data
Whether this decline extends or a stabilization phase begins will likely become clearer by the end of the week. The upcoming US Nonfarm Payrolls report on Friday is seen as the next major indicator of the Fed’s potential policy flexibility. A hold above the technical support level near $4,373 per ounce would be an initial sign of a potential floor forming. A breach below that level, however, could open the door for further losses—at least until long-term oriented buyers see sufficient value to re-enter the market in force.
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