Gold’s Paradox: Structural Demand Meets a Geopolitical Drag That Won’t Let Go

Gold clawed back toward $4,600 an ounce on Friday, but the rally masks a deeper tension: the very geopolitical turmoil that typically sends investors scrambling for haven assets is this time acting as a brake. Bullion was last seen at $4,612, up 1.9% on the session and 6.2% year?to?date, yet still 15% below its January high of $5,450. The bounce follows a plunge to a two?month low near $4,390 on Wednesday, triggered by fresh US military strikes on Iranian bases that sent crude oil and the dollar surging.

The irony is sharp. While gold often thrives on crisis, the latest escalation in the Middle East has rejuvenated inflation fears and kept the Federal Reserve’s tightening bias alive. The CME FedWatch Tool now assigns zero probability to a rate cut in 2026 as the most likely scenario. “The energy?supply shock has crushed hopes for lower US interest rates,” said Amy Gower of Morgan Stanley. “Gold isn’t playing its usual safe?haven role this time.” From its February peak of $5,275, the metal shed $540 in ten weeks as oil prices climbed and the dollar strengthened.

Yet Friday’s uptick owes something to a glimmer of diplomacy. Reports of a possible 60?day ceasefire between Washington and Tehran prompted investors to rotate out of energy assets and back into gold, even as core issues—control of the Strait of Hormuz, Iran’s nuclear programme, and US sanctions—remain unresolved. On the macroeconomic front, softer inflation prints from German states (North Rhine?Westphalia at 2.4%, with Bavaria and Baden?Württemberg also easing) and a dip in WTI crude to an six?week low of $87 a barrel have reduced pressure on the Fed to hike further. The dollar index slipped to 98.80, making bullion cheaper for foreign buyers. Commerzbank analysts noted that the market is already pricing an end to the rate?hiking cycle, despite recent hawkish comments from Fed official Christopher Waller.

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

Underlying this short?term noise is a powerful structural force: central?bank demand. The World Gold Council reported net purchases of 244 tonnes in the first quarter of 2026. China added a further 8 tonnes in April, its strongest monthly buy since December 2024, extending a buying streak that has now run for 18 months. Poland, Uzbekistan, and Ghana are also accumulating reserves. The shift in reserve?management behaviour dates back to the freezing of $300 billion in Russian central?bank assets in 2022—a move that made gold, which sits physically in home vaults beyond the reach of foreign jurisdictions, suddenly far more attractive. Not all official buyers are in accumulation mode, however. Turkey, one of the largest purchasers in 2025, sold 8.1 tonnes in the first two months of 2026 to help support the lira and temper local demand.

Analyst year?end targets for gold span a wide range. Morgan Stanley, after a downward revision, sees $5,200; J.P. Morgan is at the top with $6,300. Goldman Sachs holds at $5,400, citing sustained central?bank buying and diversification away from the dollar—70% of the institutions Goldman surveyed expect global gold reserves to rise over the next twelve months. The Reuters quarterly poll from April produced a median annual average forecast of $4,916. On the downside, a hawkish Fed pivot, renewed dollar strength, slower official?sector purchases, or a lasting geopolitical de?escalation could all cap gains.

Technically, the market is in a neutral zone. The relative strength index sits near 50, offering room for further upside. The $4,600 level is the immediate resistance; holding above $4,500 would confirm a bottom after the recent losses. Silver also advanced, climbing to $75.48, signalling that the recovery extends beyond the yellow metal. On the supply side, China’s gold production fell in the first quarter due to safety inspections that temporarily idled some smelters.

The question that will define the next few weeks is whether the structural tailwind from central?bank hoarding can outweigh the short?term headwinds of an Iran?driven energy shock and a still?restrictive Fed. Friday’s bounce suggests some resilience, but with the two?month low still fresh, gold’s path above $4,600 is far from assured.

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