Gold is entering a highly sensitive phase as the market continues to receive support from geopolitical uncertainty, while at the same time facing pressure from a stronger U.S. dollar, rising bond yields, and expectations that interest rates may stay higher for longer. Although gold has managed to maintain initial support around $4,700 per ounce, bullish momentum remains limited as prices have yet to make a clear breakout above the $4,800 to $4,850 per ounce area.

According to Reuters, spot gold rose to around $4,721.15 per ounce in the final trading session of the week, but still posted a weekly decline of more than 2%, heading for its first weekly loss after four consecutive weeks of gains. U.S. June gold futures also edged higher to $4,740.90 per ounce, showing that some recovery demand remains, but not enough to change the short-term market structure.

Why Has Gold Struggled to Break Higher?

Normally, geopolitical tensions tend to support gold as investors look for safe-haven assets. However, the current environment is more complicated. Tensions in the Middle East, especially risks related to the Strait of Hormuz, are not only increasing defensive demand but also pushing oil and energy prices higher.

Reuters reported that gold came under pressure as inflation concerns linked to the Middle East conflict raised the possibility that interest rates could remain elevated for longer. During the session on April 23, spot gold briefly fell to $4,663.69 per ounce, its lowest level since April 13. Brent crude was also reported to be trading above $100 per barrel, while the U.S. dollar and Treasury yields strengthened, reducing the appeal of gold, which is a non-yielding asset.

In other words, gold is stuck in a difficult position. Geopolitical uncertainty supports safe-haven demand, but the same uncertainty is also driving oil prices higher, fueling inflation concerns, and reducing expectations that the Federal Reserve will cut interest rates soon. For gold, this is far from an ideal combination.

Oil Prices and Inflation Are Becoming Bigger Risks for Gold

One key point to note is that the current energy shock is not limited to crude oil. According to analysis from Saxo Bank, disruptions around the Strait of Hormuz are spreading to other commodity groups such as diesel, jet fuel, petrochemical feedstocks, and fertilizers. This increases pressure on supply chains, industrial production, transportation costs, and even food prices.

Saxo also noted that gold is currently trading within a broad range between $4,650 and $4,850 per ounce, while rising oil prices continue to influence the U.S. dollar and inflation expectations.

Inflationary pressure has also started to affect U.S. consumer sentiment. According to Reuters, the University of Michigan Consumer Sentiment Index fell to 49.8 in April, a record low. One-year inflation expectations rose to 4.7%, while five-year inflation expectations increased to 3.5%. Gasoline prices remained above $4 per gallon, while diesel prices stayed above $5 per gallon, showing that energy costs are directly affecting household inflation expectations in the United States.

Against this backdrop, markets have reason to believe that central banks may not rush to ease policy. That is exactly what is creating short-term pressure on gold.

The Fed Is Likely to Remain Cautious

Next week, the main focus of the market will be the Federal Reserve’s monetary policy meeting. After a period in which investors had expected the Fed to cut interest rates, recent developments have weakened those expectations.

According to a Reuters survey, the Fed may wait at least six months before cutting interest rates, as the energy shock caused by the war has increased inflation risks. In a survey conducted from April 17 to April 21, 56 out of 103 economists expected the Fed’s benchmark interest rate to remain within the 3.50% to 3.75% range until the end of September. Nearly one-third of economists now believe that the Fed may not cut rates at all this year.

This is an important factor for gold. When interest rates remain high, the opportunity cost of holding gold increases. Investors may prefer the U.S. dollar or U.S. Treasuries, especially when yields are rising. This makes it difficult for gold to sustain a strong rally unless there is a major catalyst from geopolitical risks or long-term buying demand.

It Is Not Just the Fed: Markets Are Watching Several Major Central Banks

In addition to the Federal Reserve, markets will also be watching policy decisions from the Bank of Japan, the Bank of Canada, the Bank of England, and the European Central Bank next week. Given the uncertainty surrounding inflation, especially because of higher energy prices, major central banks are likely to maintain a cautious stance.

If central banks continue to signal a “higher for longer” policy outlook, gold could remain under pressure. On the other hand, if economic data shows clear signs of weakening growth or cooling inflation, expectations for rate cuts may return and provide support for gold prices.

Key economic data to watch next week includes U.S. Consumer Confidence, Housing Starts and Building Permits, U.S. Q1 GDP, the PCE inflation report, Initial Jobless Claims, and the ISM Manufacturing PMI. Among these, the PCE report will be particularly important because it is one of the inflation indicators closely monitored by the Fed.

Technical Outlook: $4,700 Remains a Key Level

From a technical perspective, gold remains trapped in a wide trading range. The $4,650 to $4,700 per ounce area is acting as near-term support, while the $4,800 to $4,850 per ounce zone remains a key resistance area. The fact that gold has repeatedly failed to break above $4,800 suggests that buying pressure is still not strong enough to confirm a new upward move.

If gold can hold above $4,700 per ounce, buyers may still have a chance to push prices back toward the $4,870 to $4,900 per ounce area. However, if prices close the week below this important support zone, selling pressure could extend toward $4,600 per ounce, or even deeper toward $4,450 per ounce if the market continues to reprice interest-rate expectations.

What is notable is that gold appears to be forming a consolidation structure with higher lows, while its upside remains capped below a major resistance area. This puts the market in a wait-and-see position: either gold breaks above resistance and resumes its upward trend, or it breaks below support and enters a clearer corrective phase.

Possible Scenarios for Gold Next Week

Bearish scenario: If oil prices continue to rise, inflation expectations heat up further, and the Fed delivers a more hawkish message, gold could remain under pressure from a stronger U.S. dollar and higher bond yields. In this case, the $4,650 to $4,600 per ounce area will be important to monitor.

Neutral scenario: If the market receives no major new catalyst and central banks maintain a wait-and-see stance, gold may continue to trade within the $4,650 to $4,850 per ounce range. This would be a consolidation scenario, but it could also create noisy and difficult conditions for short-term traders.

Bullish scenario: If Middle East tensions ease, oil prices decline, and inflation data comes in softer than expected, expectations for Fed rate cuts could return. In that case, gold would need to break clearly above the $4,850 to $4,900 per ounce area to confirm renewed bullish momentum.

Conclusion

Gold still has long-term support from geopolitical uncertainty, fiscal risks, rising public debt, and defensive demand from investors. However, in the short term, the market is being heavily influenced by monetary policy and inflation expectations.

The biggest issue for gold right now is not the lack of a bullish narrative, but the lack of confidence that a clear monetary easing cycle is coming soon. As long as oil prices remain elevated, the U.S. dollar stays strong, and the Fed remains cautious, gold may continue to be capped within its current trading range.

Next week, the $4,700 per ounce level will remain a key area to watch. If gold holds above this zone, a recovery remains possible. But if this support is lost, downside pressure could extend further before the market finds new momentum for the longer-term uptrend.

Source: Reuters