GOLD Analysis
Gold Retreats Below $3,380 as Dollar Strength Counters Safe-Haven Flows Amid Central Bank Demand
Highlights
- A stronger U.S. dollar, underpinned by Fed’s expected rate-hold, offset safe-haven demand from Israel–Iran tensions, pulling gold below $3,380/oz.
- World Gold Council survey shows 95% of central banks expect to raise reserves, with 43% planning increases, providing structural support for gold.
- Upcoming Euro-zone inflation data and U.S. unemployment claims, housing starts, and Fed guidance will be pivotal for gold’s near-term direction.
Overview:
Gold traded down to around $3,280–$3,380 per ounce, slipping below the $3,380 mark as a firmer U.S. dollar mitigated much of the safe-haven buying triggered by renewed Middle East tensions. Israel’s intensified strikes near Tehran and subsequent missile launches from Iran elevated fears of a broader conflict, yet the stronger dollar—supported by expectations that the Federal Reserve will keep rates unchanged at its upcoming meeting—limited gold’s advance. President Trump’s security briefing, hinting at possible deeper U.S. involvement, added to geopolitical jitters but was insufficient to offset yield-driven headwinds.
Monetary policy remains central: Fed communications are expected to reaffirm a “steady rates” stance, but markets will scrutinize guidance for hints of timing on future rate cuts. Softer recent inflation readings have fueled hopes for easing later in the year; if confirmed by upcoming data, this could lend underlying support to gold over the medium term. However, near-term gold appeal is capped as real yields remain relatively elevated given the Fed’s patient but cautious outlook.
A notable structural underpinning comes from central bank demand: a World Gold Council survey indicates 95% of central banks expect global gold reserves to rise, with 43% planning to boost their own holdings. This reflects a strategic shift toward portfolio diversification amid concerns over fiscal strains and currency volatility. Such persistent, large-scale official buying provides a firm floor under gold prices even when short-term risk sentiment ebbs.
On the macro front, upcoming data will influence gold’s trajectory. In the Euro Zone, releases like Current Account, Final Core CPI y/y, and Final CPI y/y will shape the euro-dollar exchange rate and risk sentiment. In the U.S., Unemployment Claims, Housing Starts, and the Federal Funds Rate announcement (or commentary around it) will inform growth and inflation outlooks. Softer-than-expected U.S. data could revive rate-cut expectations and buoy gold, whereas strong readings may reinforce the dollar and pressure bullion.
Technically, gold’s support lies near $3,345, with a break below risking a slide toward $3,300 or lower. Resistance sits around $3,405, above which renewed safe-haven demand might spark a retest of recent highs. Given the current market price near $3,280–$3,300, a tactical sell-on-rallies approach is appropriate: consider short positions on moves up toward $3,390, targeting $3,360–$3,345, with a protective stop above $3,405. Should Fed guidance or inflation data markedly weaken, boosting rate-cut odds, traders may pivot to buy-on-dips near key support levels.
Overall, gold’s immediate path is shaped by the tug-of-war between safe-haven flows from geopolitical flare-ups and yield-driven pressures from a stronger dollar and steady Fed stance. Yet, robust central bank buying and potential late-year easing form a supportive backdrop for gold over a longer horizon.