Gold’s $4,723 Pivot: Stagflation Fears and a Fed Power Vacuum Create a Fractured Market

Gold trades near $4,724 as stagflation fears from Gulf crisis clash with dollar strength from Fed power struggle, keeping the metal range-bound.

The gold market is caught between two powerful, opposing forces. On one side, a geopolitical crisis in the Persian Gulf is stoking stagflation fears that would normally send the metal soaring. On the other, a bitter political power struggle over the leadership of the Federal Reserve is strengthening the dollar and draining momentum from the rally.

London closed the week at $4,723.60 per troy ounce, a modest recovery from earlier lows. The rebound came after a jarring inflation signal: the University of Michigan’s latest survey showed US consumers now expect prices to surge 4.7% over the next year, up sharply from 3.8% just a month earlier. That kind of reading would typically be rocket fuel for gold, but the metal remains stuck in a tight range.

The blockage of the Strait of Hormuz is the primary culprit behind the rising price pressures. With energy costs climbing globally, Brent crude hovering around $106 a barrel, and President Donald Trump ordering a hardline response against naval mines, the inflation outlook has darkened considerably. A fragile ceasefire with Iran remains in place indefinitely, but genuine diplomatic progress has stalled, keeping the safe-haven bid alive even as the weekly performance shows a roughly 2% decline.

The Fed’s Leadership Crisis Weighs Heavier Than Inflation

What should be a textbook bullish environment for gold has been complicated by an unprecedented political drama in Washington. Kevin Warsh, Trump’s pick to replace Jerome Powell as Fed chair, is stuck in Senate limbo. Senator Thom Tillis has blocked the confirmation vote, demanding an end to a criminal investigation into the current chair. Trump has refused to drop the probe, creating a standoff with no clear resolution.

Powell’s term officially ends on May 15. He has signaled he is willing to stay on as a transitional chief if necessary, but Trump has threatened to fire him. The result is a constitutional clash with no modern precedent. Markets are pricing in near-100% odds that the central bank holds rates steady at 3.50% to 3.75%, with any talk of cuts in 2026 now dismissed. Some traders are even beginning to price in the possibility of hikes.

The dollar has been the primary beneficiary of the uncertainty. The dollar index is on track for its first weekly winning streak in nearly a month, putting downward pressure on gold by making it more expensive for overseas buyers. That dynamic has overwhelmed the geopolitical risk premium that would normally be supporting the metal.

Chart Support Holds, But ETF Flows Tell a Different Story

From a technical perspective, the $4,668 support level has held firm under selling pressure, offering some relief to bulls. The next meaningful resistance sits at $4,850. But the flow of capital tells a more cautious story. The world’s largest gold ETF, SPDR Gold Shares, has recorded net outflows for six consecutive trading sessions, suggesting Western retail investors are stepping to the sidelines.

Asian investors are taking the opposite view. Chinese gold funds have attracted more than $8 billion in inflows this year alone, while central banks in Poland and Uzbekistan have continued their purchasing programs. This divergence between East and West is creating a fragmented market where the same asset is being viewed through completely different lenses.

What Comes Next: Data and Tone

The coming week will provide the next major catalysts. The Fed announces its interest rate decision on April 29, followed a day later by the PCE price index, the central bank’s preferred inflation gauge. Economists expect the core reading to climb to 3.5%, driven by the war-related surge in oil prices. If those figures confirm a stagflationary scenario, the $4,850 resistance could come back into play quickly.

But the tone of Powell’s press conference may matter more than the numbers. If he signals openness to rate cuts later this year despite rising oil prices, gold could find fresh momentum. If he sticks to a patient stance, the downward pressure will persist. Either way, the unresolved leadership question at the Fed will hang over the entire proceedings, keeping the market on edge.