Gold’s Bifurcated Market: Physical Appetite Grows as Paper Speculators Retreat

Gold clawed back above the $4,500 threshold on Friday, settling at $4,569.90 an ounce with a 1.57% daily gain and a 1.08% weekly advance. The technical picture is cleaner than a week ago, yet the market beneath the surface is sending deeply contradictory signals. Speculative capital is fleeing futures at a pace not seen since 2009, even as physical demand from China surges and the metal retains its safe-haven appeal amid fragile geopolitics.

Open Interest Hits a 17-Year Low

The latest Commodity Futures Trading Commission data shows open interest in gold futures slumped to 353,489 contracts on May 26, a 6.81% weekly drop. By May 29, the tally had fallen further to roughly 328,612 contracts — the lowest level in nearly two decades. Market participants interpret this exodus as a clear warning: the recent price recovery lacks the backing of fresh speculative money. Instead, it appears driven by short-covering and robust physical buying, not a new wave of bullish conviction.

The neutral Relative Strength Index reading of 49.8 reinforces the picture of a market in equilibrium, neither overbought nor oversold. Gold remains below its 50-day moving average of $4,639.16, and the 20-day line continues to act as stubborn resistance. Important support zones lie at $4,436 and $4,341, levels that would reframe Friday’s rally as a mere reflex move.

Chinese Imports Surge While Analysts Diverge Sharply

The market’s bright spot comes from Asia. Net gold imports through Hong Kong jumped 81.2% in April to 86.7 metric tons, underscoring that central bank and retail demand from China is a tangible, not just theoretical, price driver. That physical undercurrent contrasts starkly with the retreat in paper positions.

Should investors sell immediately? Or is it worth buying Gold?

The divergence extends to institutional forecasts. Goldman Sachs targets $5,400 an ounce by end-2026, while JPMorgan’s older call stands at $6,000–$6,300. On the bearish side, S&P Global sees gold at $2,500 in 2026 and falling further to $2,100 in 2027. UBS recently trimmed its year-end forecast from $5,900 to $5,500. Such a wide spread of estimates feeds the nervousness already visible in the open interest plunge.

Iran Talks and Macro Headwinds Keep Geopolitical Premium Alive

Beyond the data, geopolitics remains central. Negotiations between the US and Iran appeared to move toward a 60-day extension of the ceasefire on May 29, though President Trump has yet to give final approval. A White House meeting on May 30 yielded no decision. Iranian officials, meanwhile, pushed back against Washington’s narrative, with the head of parliament insisting that concessions are won only “through rockets.” The situation is far from stable.

On the macro front, inflation worries and expectations of persistently high interest rates continue to weigh on gold. A softer US dollar offered some support last week, but rising bond yields create a headwind for the non-yielding asset. The interplay of these forces — a retreating dollar, stubborn yields, and a combustible ceasefire — is likely to keep the metal range-bound until clarity emerges from the Iran talks.

Gold at a turning point? This analysis reveals what investors need to know now.

Monday’s session will be telling: if gold can attack resistance near $4,587 and the 50-day average, the Friday breakout gains credibility. A fall back below $4,500 would cast the recovery as a short-lived reaction to a turbulent week.

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