Gold’s $4,500 Support Holds as Central Bank Buying Counters Fed Hawkish Shift and Iran Détente

Gold ends week at $4,522.60, down 0.73% weekly and 4.44% in May. New Fed Chair Warsh signals tighter policy; central bank purchases hit record 244 tonnes in Q1 2026, softening downside.

Gold ended the trading week at $4,522.60 an ounce, shedding 0.48% on Friday alone and leaving the yellow metal down 0.73% since the previous Friday. The monthly performance looks worse: a decline of 4.44% since the start of May. But behind the near-term weakness, a structural tug-of-war is playing out. On one side stands a newly hawkish Federal Reserve and easing geopolitical tensions; on the other, a record-breaking wave of central bank demand that is providing a floor under prices.

The catalyst for this week’s selling was twofold. Kevin Warsh formally assumed the chairmanship of the Federal Reserve on May 22, replacing Jerome Powell, and quickly signalled a tighter policy stance. Warsh has hinted at balance-sheet reduction and closer coordination with the government on inflation. Markets now price a 58% probability that the Fed will hike rates by 25 basis points before December 2026, while US inflation remains stuck at 3.8% and long-term inflation expectations have crept to 3.9%. Fed governor Christopher Waller reinforced the message, reiterating his opposition to early easing. The resulting rise in Treasury yields and a firmer dollar raised the opportunity cost of holding non-yielding bullion. At the same time, diplomatic talks between the US and Iran have reduced safe-haven demand; reports of a breakthrough in negotiations prompted investors to unwind hedges. In Delhi, gold fell by 600 rupees to 1.64 lakh per 10 grams, with analysts pinning the drop squarely on easing market anxiety.

Against those headwinds, the price has retreated about 17% from the January peak of $5,450, a level that now looks distant. Yet the downside has been contained, thanks in large part to central banks. The World Gold Council reported net purchases of 244 tonnes in the first quarter of 2026, a 17% increase from the previous quarter, led by Poland, China and Uzbekistan. Goldman Sachs responded by lifting its monthly central-bank buying assumption from 29 tonnes to 60 tonnes, describing the institutional demand as a structural cushion that diversifies reserve holdings away from the dollar. The current spot price is well below the 100-day moving average of $4,835 — a gap that, historically, has often preceded a recovery once macro winds shift.

Demand from the physical market is not uniformly robust, however. India, one of the world’s largest gold consumers, raised its import duty from 6% to 15%, a move that is expected to reduce demand by 50 to 60 tonnes this year, according to the World Gold Council. The impact has been most pronounced in the bar and coin segment. On the supply side, mining companies are advancing projects: 1911 Gold Corp is pushing ahead with a test mining program at its True North Mine in Manitoba, while NevGold is accelerating development of the Limo Butte project in Nevada, which also holds antimony resources.

Technically, gold is trading about 3% below its 50-day average of $4,670, and the relative strength index at 49.8 points to neutral territory. The psychological barrier at $4,500 is seen as a critical support level for the coming week. Should Warsh flesh out the details of balance-sheet tightening in the coming days, pressure could persist; but if the Iran talks stumble again, the risk premium could return and rekindle buying. The banks remain broadly constructive: Goldman Sachs targets $5,400 by the end of 2026, while UBS sees a recovery to $5,200 if geopolitical tensions or a weaker dollar provide fresh impetus. For now, the market is caught between a hawkish Fed and a safety net woven by the world’s central banks.