Gold’s $4,710 Crossroads: A Fed Farewell, a Hawkish Heir, and the Hormuz Wildcard

Gold treads water near $4,710 after a 2.5% weekly drop, pressured by a strong dollar and fading geopolitical risk, with the Fed's leadership handover and policy meeting in focus.

The yellow metal is treading water at roughly $4,710 an ounce to start the week, but the calm belies a storm of crosscurrents. After a 2.5 percent slide last week from $4,831, gold is caught between a resurgent dollar and a geopolitical risk premium that has all but evaporated. The real action, however, is centered on the Federal Reserve, where a leadership handover and a pivotal policy meeting are set to define the near-term trajectory.

The Dollar’s Grip and a Broken Floor

The primary culprit behind gold’s recent retreat is the US dollar, which has climbed to 99.3 on the index. This strength has overwhelmed the usual safe-haven bid, especially as the market has grown numb to headlines from the Middle East. The Iran ceasefire-escalation cycle repeated itself four times in April alone, and each new flare-up has drawn a weaker response. The risk premium that once supported bullion has largely faded.

Technically, the picture has deteriorated. Gold breached the $4,750 support level last week, opening the door to a potential test of the next demand zone between $4,620 and $4,680. The RSI indicator currently sits at 58, signaling a neutral phase, but the annualized volatility remains elevated at nearly 63 percent, suggesting the potential for sharp moves in either direction.

Powell’s Final Act

All eyes are on the Federal Open Market Committee meeting on April 28-29. A rate change is off the table — the probability of holding the federal funds rate steady at 3.50 to 3.75 percent stands at 99.5 percent. This is Jerome Powell’s last scheduled meeting as Fed chair. On May 15, Kevin Warsh takes over, and the market is already pricing in the shift.

Warsh is viewed as a hawkish hardliner on inflation, advocating for a stricter inflation target. His confirmation chances surged after the Department of Justice dropped an investigation into Powell, clearing the path for the transition. For gold, a more restrictive monetary policy and higher real yields are traditionally a heavy headwind.

The key question for this week’s meeting is Powell’s language. Will he signal openness to rate cuts if oil prices ease? The environment makes that difficult. The University of Michigan’s inflation expectations jumped to 4.8 percent in April — a full percentage point higher than March, marking the largest monthly leap in a year. J.P. Morgan expects the Fed to hold rates steady for the rest of 2026 and only hike by 25 basis points in the third quarter of 2027.

The Hormuz Variable

Geopolitics and monetary policy are colliding in the Strait of Hormuz. Iran has reportedly submitted a new proposal through Pakistani intermediaries, offering to extend the ceasefire and reopen the strait. However, Tehran insists it will not negotiate as long as the US Navy maintains its blockade.

A credible reopening of Hormuz would push oil prices lower, reducing inflation expectations and easing pressure on the Fed. That would be a tailwind for gold. Until that happens, the metal remains capped. The January all-time high of $5,597 looks distant, but a dovish hint from Powell this week could quickly change the mood.

Data and Divergence

Beyond the Fed, the calendar is packed. US GDP figures for the first quarter are due, along with ADP employment data on Wednesday and weekly jobless claims. A weak GDP print would stoke recession fears, bolstering gold’s safe-haven appeal. Strong growth, on the other hand, would support the central bank’s hawkish stance.

The market is deeply divided. Western investors have been pulling capital — billions flowed out of North American gold ETFs in March alone. Yet central bank purchases and large US fiscal deficits continue to provide a floor. Wall Street analysts are split, with year-end price targets ranging widely.

For now, gold is caught between a hawkish succession at the Fed and the unpredictable geopolitics of the Middle East. The outcome of this week’s meeting — and Powell’s parting words — could set the tone for the months ahead.