Tug of War: Yields and Geopolitical Risk Collide at Gold’s $4,500 Floor

Spot gold opens at $4,539.16, down 0.6%, as hawkish Fed expectations and 15-month high yields offset geopolitical risks from Strait of Hormuz tensions.

Spot gold opened Tuesday morning at $4,539.16 an ounce, a 0.6% decline from Monday’s close, as rising US bond yields and a firmer dollar continued to sap the metal’s safe-haven appeal. The market remains locked in a struggle between the threat of a prolonged hawkish Federal Reserve and fresh tensions in the Strait of Hormuz.

Monday’s session illustrated the fracture perfectly. A drone attack on the Barakah nuclear power plant in the United Arab Emirates — combined with ongoing disruptions around the Strait of Hormuz — propelled bullion to a daily high of $4,565.00. That rally evaporated quickly when the US Treasury market pushed back. The yield on the ten-year note hit a 15-month high of 4.63%, undercutting any geopolitical risk premium. Gold slid as low as $4,480 before recovering to finish at $4,538, a gain of just 0.09%.

The dollar index DXY eased slightly to 99.10, which in normal circumstances would have provided support, but the expected correlation failed to materialise. Instead, traders factored in a 50% probability of another Fed rate hike by the end of the year, reinforcing the weight of interest-rate expectations. The LBMA PM reference price on Monday settled at $4,565.40.

That yield drag was also reflected in euro-denominated gold, which slipped 0.39% to €3,901.90, a slightly shallower decline thanks to the weaker dollar.

Institutional demand continues to offer a floor. India’s gold reserves rose by nearly $5.6 billion to $120.9 billion, a signal that central banks are using the price dip as a buying opportunity. Separately, the World Gold Council reported that net central bank purchases reached 244 tonnes in the first quarter, while industrial demand — fuelled by the AI boom — topped 80 tonnes in the same period.

Technically, gold is still in correction territory after January’s record above $5,500. The 50-day exponential moving average has turned into resistance, and the relative strength index sits at 38, close to oversold but not yet generating a clear reversal signal. Support at $4,500 remains the key line in the sand; a break below that could trigger selling toward $4,475, with the 200-day moving average at $4,342 as the next major floor. On the upside, the Monday high of $4,586 is the first hurdle, ahead of $4,600 and a broken recovery channel near $4,640.

Positioning has also cooled. Comex net long positions held by money managers slipped from 390 tonnes at the end of April to around 384 tonnes, and trading volume edged above the recent average. The market is now watching two catalysts: Tuesday’s LBMA AM fixing at 10:30 GMT as an early sentiment check, and the release of the FOMC minutes on May 20, which will clarify whether policymakers intend to maintain their current hawkish stance — and whether the $4,500 floor can hold.