Gold’s Paradox: A $4,638 Rebound as a Split Fed and Stagflation Fears Collide

Gold rebounds sharply amid Fed split, stagflation fears, and Middle East tensions, settling at $4,637.95 as rate cut odds rise.

Gold staged a sharp intraday recovery on Thursday, climbing more than two percent from one-month lows, even as the Federal Reserve delivered its most divided policy decision in over three decades. The precious metal settled at $4,637.95 per ounce, a move that left analysts parsing conflicting signals from central bank hawks, geopolitical tremors in the Middle East, and a US economy flashing stagflation warnings.

A Fed Fractured Since 1992

The Federal Open Market Committee held its benchmark rate steady at 3.50-3.75 percent on April 29, but the vote told a deeper story. Eight members backed the decision, while four dissented — the largest split since 1992. Governor Stephen Miran pushed for a rate cut, while regional presidents Beth Hammack, Neel Kashkari, and Lorie Logan opposed any dovish language in the statement.

Chair Jerome Powell warned that the oil-driven inflation shock had not yet peaked, while simultaneously flagging growth risks from elevated gasoline prices squeezing household incomes. The market absorbed the message quickly. The probability of a rate cut by March 2027 jumped from around 5 percent to 30 percent on the CME FedWatch tool, before settling back. Morgan Stanley promptly scrapped its forecasts for September and December rate cuts entirely.

The ten-year US Treasury yield rose eight basis points to 4.43 percent, and the dollar strengthened — classic headwinds for gold priced in the greenback.

Stagflation’s Paradox

First-quarter GDP data added to the confusion. Real GDP grew at an annualized rate of 2.0 percent, a sharp acceleration from the prior quarter’s 0.5 percent but slightly below consensus. Core GDP — real final sales to domestic private purchasers — came in at 2.5 percent. The Atlanta Fed’s GDPNow tracker had recently pegged growth at just 1.24 percent, down from 3.1 percent in late February.

Consumer prices stood at 3.3 percent, while Brent crude traded above $110 a barrel. That combination — sluggish growth plus sticky inflation — creates a dilemma central banks cannot easily resolve. For gold, it proved unexpectedly supportive. Weak growth and persistent inflation drove investors toward the metal as a hedge, even as a hawkish Fed argued against it.

Hormuz Remains the Wild Card

Geopolitical developments in the Persian Gulf added another layer of volatility. Oil and gas prices extended their rally after President Trump rejected a deal with Iran that did not address its nuclear program. The Strait of Hormuz remained largely closed, keeping energy costs elevated and feeding inflation expectations.

Yet reports surfaced that Trump had informed his advisers of his willingness to end the confrontation with Iran, providing a brief relief rally that lifted gold from its intraday low of $4,510 to as high as $4,613. The metal later extended gains to $4,638 by midday US time.

The US maintains a naval presence in the Gulf, and Trump has tied an end to the standoff to a nuclear agreement. Until that materializes, the strait stays effectively blocked — and oil stays expensive.

Technical Resistance Holds, But Demand Endures

Despite the rebound, gold’s technical picture remains fragile. The metal has slipped below the 200-hour EMA, and the former support zone between $4,665 and $4,670 now acts as resistance. The RSI hovers near 40, offering no clear buy signal. The MACD histogram has turned positive, but that alone does not confirm a trend reversal.

Key resistance levels lie at $4,698 along the descending trendline, followed by the 21-day SMA at $4,725 and the 100-day SMA around $4,751. On the downside, support sits near $4,590, with the 200-day SMA at roughly $4,264 marking the strategic floor.

On a monthly basis, gold remains roughly two percent lower — the second consecutive losing month.

Yet the structural story tells a different tale. Central banks purchased three percent more gold in the first quarter of 2026 than a year earlier, pushing total demand to 1,231 tonnes — a quarterly value of $193 billion. London vaults held approximately 9,339 tonnes of gold at the end of March, valued at $1.38 trillion.

Goldman Sachs maintains its year-end target of $5,400 per ounce, citing sustained central bank buying and anticipated Fed easing down the line. A Reuters survey sees the average gold price for 2026 at $4,916 per ounce.

For now, the near-term direction hinges less on central bank projections and more on whether Trump pursues a diplomatic off-ramp with Iran. A credible de-escalation in the Strait of Hormuz would likely depress oil prices — and with them, the primary driver of gold’s current rally.