Key Takeaways:
COMEX gold is trading in its tightest range in months, squeezed between the 50-day moving average at $4,630.62 and the 200-day moving average at $4,412.44, as the Iran conflict keeps yields elevated and the dollar firm.
"The Iran conflict has supported yields and the dollar while reducing expectations for rate cuts, but debt concerns, de-dollarization, sticky inflation and steady central bank demand remain key pillars of support for gold," Ole Hansen, head of commodity strategy at Saxo Bank, said. Those 2025 drivers will reassert themselves once the geopolitical pressure from the Iran war subsides, he added.
Spot gold tested the bull-bear line at $4,481.78 earlier this week, finding support near the 20% drawdown level from the January record high of $5,602.23. The metal has fallen roughly 16% from that all-time closing high, with higher rate expectations since the escalation of tensions weighing on sentiment. The 10-year U.S. Treasury yield dropped to 4.43% on Tuesday while the 2-year slipped near 4.02%, and the U.S. Dollar Index hovered around 99.05 — all three headwinds easing simultaneously for the first time in months.
The narrowing gap between the 50-day and 200-day moving averages signals a major breakout is approaching, though the direction remains uncertain. Two lower tops since April suggest downside risk, with the 200-day at $4,412.44 as the next support level. A break below that would expose the May 28 low of $4,366.23 and the March 23 trough of $4,099.12. On the upside, reclaiming the 50-day would open a path toward the April high near $4,891.
Structural Drivers Remain Intact
Central bank gold demand totaled 243.7 metric tons in the first quarter, in line with the prior-eight-quarter average of 242.8 tons, according to the World Gold Council. Turkey's sale of roughly 70 tons in March — a tactical move to defend the lira amid soaring energy import costs — was the largest single seller, but holdings have since stabilized around 535 tons.
India's decision in mid-May to more than double gold import tariffs to 15% from 6% could slow consumer demand by as much as a quarter this year, analysts estimate. Indian consumer demand totaled 721.1 tons in 2025. A 180-ton shortfall would represent less than one-twelfth of global gold investment demand of 2,204 tons last year, suggesting other buyers can absorb the gap.
Energy Prices and the Fed Calculus
West Texas Intermediate crude pulled back on Tuesday after President Donald Trump said Iran negotiations are continuing, taking some of the supply disruption premium out of the market. Lower oil changes the inflation calculation for gold — energy costs are the biggest input driving inflation expectations, and a pullback eases pressure on the Federal Reserve to stay restrictive.
The longer the Strait of Hormuz remains effectively closed — now 89 days — the greater the risk of negative economic impacts that would support hedging demand for gold. Global oil stockpiles that have buffered the supply loss are dwindling, and analysts expect energy and food prices to rise further as inventories approach minimum operating levels.
Friday's May nonfarm payrolls report is the next catalyst. Economists expect roughly 85,000 jobs with unemployment holding at 4.3%. A miss would challenge the higher-for-longer rate narrative and likely drive gold higher. A beat would send yields and the dollar back up, testing today's rally.
This article is for informational purposes only and does not constitute investment advice.
