The World Gold Council says gold is under pressure in the short term, but long-term support remains strong.
Dubai: Gold buyers waiting for a better entry point may get another opportunity, as the World Gold Council says the metal remains vulnerable in the short term, even though its long-term support stays firmly intact.
Gold closed April at $4,611 an ounce, nearly unchanged for the month, as investors weighed strong exchange-traded fund inflows and dip buying against easing market volatility, improved risk appetite, and delayed expectations for US interest rate cuts.
Gold is not in a clear upward trend for now. The market has lost some momentum following the March sell-off, and prices may need a fresh catalyst before the rally resumes.
Buyers stay cautious after March decline
The World Gold Council said gold’s performance in April was driven by two opposing forces. Global gold ETFs recorded strong inflows, led by Europe, while Asia and the US each accounted for roughly a third of Europe’s inflows during the month.
The council said European demand was likely driven by concerns that the region would be more exposed to any closure of the Strait of Hormuz.
At the same time, a sharp decline in market volatility weighed on gold as investors shifted back into risk assets. US equities rallied, options markets calmed, and inflation concerns eased after an initial spike linked to the Middle East crisis.
As a result, gold ended the month largely flat despite heightened geopolitical tensions.
Markets see crisis as temporary
The World Gold Council said markets appear to view the Middle East crisis and any potential Hormuz disruption as temporary. That has pressured gold, as investors are not yet pricing the situation as a long-term threat to inflation or economic growth.
The report said US near-term inflation breakeven rates climbed as the crisis intensified, but have since surrendered much of those gains. The US economy has also been less exposed to the energy shock, while consumers remain relatively resilient for now.
That has left gold in a difficult position. Geopolitical risks persist, but investors do not yet see enough reason to move aggressively back into safe-haven assets.
Gold could test lower levels
The World Gold Council said gold remains technically vulnerable in the near term, although its long-term upward trend is still intact.
March’s decline found support near the 200-day moving average and the $4,075-an-ounce retracement level. However, the rebound has stalled below the 55-day moving average, increasing the likelihood of another test of support.
According to the report, a sustained move below $4,075 an ounce would point to a more significant technical top.
Higher-for-longer US interest rate expectations are also weighing on gold. Because gold does not generate interest, delayed rate cuts make it less attractive compared with yield-bearing assets. Stronger expectations for US equities have also reduced the urgency for investors to seek safety in gold.
Long-term support remains intact
The World Gold Council said the current market calm could still prove fragile.
Oil markets are still pricing in stress from the crisis, with Brent Crude and West Texas Intermediate December contracts trading at a 22% to 25% premium compared with pre-crisis levels. The report also cited estimates from J.P. Morgan suggesting that the operational floor for global oil inventories could be reached by September if the situation remains unresolved.
That could revive inflation pressures, weaken growth expectations, and boost demand for gold once again.
The longer-term outlook for gold also continues to be supported by central bank buying, elevated debt levels, widening fiscal deficits, dollar diversification, and the reduced reliability of bonds as portfolio protection during inflation shocks.
Gold may remain volatile until markets receive a clearer signal. Another spike in oil prices, renewed inflation concerns, a weaker dollar, or stronger investor demand could drive prices higher again. On the other hand, calmer market conditions, delayed US rate cuts, and stronger equity markets could continue to weigh on gold prices.
That means jewellery buyers may need to monitor daily price movements closely, while investors may have to remain patient. The World Gold Council believes gold still has strong long-term support, but its next major move could depend on whether markets are correct in treating the Middle East crisis as temporary.
