Gold’s $4,600 Purgatory: Record Central Bank Buying Meets a Hawkish Fed and a Hormuz Oil Shock

Gold closes week down 2% at $4,625, trapped between record institutional buying and a hawkish Fed, with inflation from the Hormuz crisis keeping rates elevated.

Gold closed the week at $4,625.60 an ounce, down roughly 2% on the week and more than 15% below its January high of $5,450. The metal finds itself in an uncomfortable holding pattern — supported by record institutional demand but weighed down by a Federal Reserve that shows no signs of easing and an energy crisis that keeps inflation expectations elevated.

A Split Fed and a Hawkish Stance

The US central bank left its benchmark rate at 3.50% to 3.75% as expected, but the voting breakdown was anything but routine. Four members dissented — the widest split on the Federal Open Market Committee since 1992 — signaling deep uncertainty about the path ahead. According to the CME Group, nearly 95% of market participants expect rates to remain unchanged in June.

The stickiness of inflation is the core problem. The ISM manufacturing index shows input prices at their highest level since April 2022, and the ongoing US naval blockade of Iranian ports keeps oil prices elevated, feeding directly into inflation expectations. That dynamic is toxic for gold: higher-for-longer rates increase the opportunity cost of holding a non-yielding asset.

The Hormuz Paradox

The Strait of Hormuz is effectively closed, and the oil market is feeling the full force. Brent crude has nearly doubled since December, settling at $108.83 on Friday — a 2.16% daily drop after reports of an Iranian response to US peace proposals briefly offered relief, but still up over 7% on the month and a staggering 79% year-to-date. West Texas Intermediate fell nearly 4% on Friday to around $101 a barrel on similar diplomatic signals, but the supply picture remains dire: US crude inventories fell by 6.2 million barrels last week, and exports hit a record 6.44 million barrels per day.

This geopolitical crisis should, in theory, be a tailwind for gold as a safe haven. But the energy price shock is fueling inflation expectations, which in turn reinforce the Fed’s hawkish stance. Gold is caught in the crossfire: the very event that would normally drive investors into the metal is instead tightening the monetary policy screws.

Record Central Bank Demand Provides a Floor

The physical market tells a different story. Central banks bought a net 244 tonnes of gold in the first quarter, 3% more than the same period last year. Global central banks purchased 863 tonnes net in 2025, and the People’s Bank of China has been adding to its reserves for 17 consecutive months. Bar and coin demand reached 474 tonnes in Q1 — the second-highest quarterly level on record — driven primarily by Asian investors.

Total gold demand hit 1,230.9 tonnes in the first quarter, a record high. This institutional buying creates a safety net beneath the price, preventing a steeper decline even as speculative and ETF flows turn cautious.

Analyst Targets Remain Bullish

Despite the near-term headwinds, the analyst community is sticking with optimistic forecasts. Goldman Sachs maintains its year-end target of $5,400, though it warns of short-term downside risks if the Hormuz disruption persists. UBS is more aggressive, seeing $6,200 by September 2026 with potential upside to $7,200. J.P. Morgan targets $6,300 by year-end, while Bank of America follows at $6,000 — both citing central bank demand, ETF inflows, and a weaker dollar outlook.

A Reuters survey puts the average 2026 forecast at $4,916. Technically, a break above $4,800 would be the next bullish signal, while a fall below $4,600 would open the door to a deeper correction.

The Week Ahead: Data Will Decide

The coming days bring a dense calendar of economic releases. Nonfarm payrolls for April, along with the unemployment rate, are due on May 8. The consumer price index follows on May 12. Weaker-than-expected data could revive rate-cut speculation and give gold fresh momentum. Stronger numbers, confirming persistent inflation, would keep the Fed on hold and maintain the pressure.

For now, gold is trading in a narrow range between $4,600 and $4,800, with the 50-day moving average near $4,833 acting as overhead resistance. The metal’s annualized volatility of 23% — unusually high for a traditional safe haven — reflects the competing forces at play. The outcome of this tug-of-war between record physical demand and a hawkish central bank will likely be decided by the data flow in the weeks ahead.