Gold's $4,500 Stability Hinges on Central Bank Buying as Fed Tightening Looms

Gold at $4,546 faces 2.82% weekly drop but central banks added 244 tonnes in Q1; Fed minutes show hawkish tilt, while geopolitical risks add uncertainty.

Gold is walking a tightrope. The metal closed Wednesday at $4,546.20 an ounce, nursing a 2.82% weekly decline and a steeper 4.06% retreat over the past 30 days. Yet year-to-date it still clings to a 4.71% gain. The tension behind those numbers reflects a market caught between powerful structural support and near-term monetary headwinds.

The most potent source of that support is the official sector. Central banks added a net 244 tonnes of gold in the first quarter, a 3% increase from the same period last year, according to the latest data. That sustained buying has helped cap downside corrections and explains why the pullback from April’s highs has been so contained.

A fresh report from Incrementum reinforces the long-term bull case, arguing gold is undergoing a "remonetisation" — reclaiming its role as a neutral reserve asset in the global monetary system rather than merely a crisis hedge. The report points to structural demand shifts from tokenised gold and stablecoin issuers like Tether, which could lock up more physical metal over time. Incrementum’s initial conservative target of $4,800 has already been hit; in an inflationary scenario, it sees prices reaching as high as $8,900 by the end of the decade.

But short-term price action is being dictated by a far more immediate force: the Federal Reserve. Minutes from the April FOMC meeting, released Thursday, revealed a clear hawkish tilt. A majority of participants said a tightening would be warranted if inflation stayed stubbornly above the 2% target. Three members objected to the easing bias in the statement, and many would have preferred to drop language implying lower rates were coming. One member did vote for a 25-basis-point cut, highlighting the split.

The fed funds rate remains at 3.50%-3.75%, and the market is now pricing a longer wait for any easing. The 10-year Treasury yield stood at 4.64%, while the dollar remained firm — a toxic combination for an asset that offers no yield. April’s US inflation reading of 3.8% dashed hopes for an early pivot. "Gold has no carry," traders note, meaning higher real rates and a strong greenback make bullion less attractive to international buyers.

Technically, the picture is neutral with a bearish tilt. The price sits below its 50-day moving average of $4,690.11, and the relative strength index at 49.8 hovers near mid-range, signalling no extreme oversold or overbought conditions. A recovery above the 50-day would brighten the outlook, whereas a break below $4,500 would bring last month’s correction back into focus.

Geopolitical risk adds another layer of complexity. The standoff over the Strait of Hormuz has kept Brent crude and WTI above $100 a barrel. Expensive energy risks prolonging inflation, which in turn pressures the Fed to keep rates higher for longer. That dynamic is a double-edged sword for gold: it boosts safe-haven demand but reinforces the very yield headwind that caps the metal’s upside. Separately, hopes for progress in US-Iran talks have tempered some of the inflation anxiety.

For now, gold remains hostage to three variables: the dollar, Treasury yields and energy prices. The structural bid from central banks and long-term narratives around remonetisation provide a floor, but the near-term ceiling is set firmly by the Fed. Thursday’s minutes have made that ceiling feel lower.