Gold buyers may get another price dip before rally resumes

Dubai: Gold buyers waiting for a better entry point may still get another chance, with the World Gold Council saying the metal looks vulnerable in the short term even though its long-term support remains intact. (Check latest UAE gold prices here, alongside prices in Saudi Arabia, Oman, Qatar, Bahrain, Kuwait, and India.)

Gold closed April at $4,611 an ounce, almost unchanged for the month, after investors balanced strong exchange-traded fund inflows and dip buying against weaker market volatility, stronger risk appetite and delayed expectations for US interest rate cuts.

Gold is not in a clean upward move for now. The market has lost some momentum after the March sell-off, and prices may need a fresh trigger before the rally resumes.

The WGC said gold’s April performance was shaped by two opposing forces. Global gold ETFs saw strong inflows, with Europe leading the buying, while Asia and the US each contributed about a third of Europe’s flows during the month.

The council said European demand was likely driven by concerns that the region would be more exposed to the closure of the Strait of Hormuz.

At the same time, a large drop in market volatility worked against gold as investors moved back into risk assets. US equities rallied, options markets turned calmer and inflation fears eased after an early spike linked to the Middle East crisis.

The result was a flat month for gold, despite the scale of geopolitical risk.

The WGC said markets appear to be treating the Middle East crisis and Hormuz shutdown as temporary. That is weighing on gold because investors are not yet pricing the disruption as a lasting shock to inflation or growth.

The report said US near-term inflation breakeven rates rose as the crisis intensified, but have since given back much of that move. The US economy has also been less exposed to the energy shock, while consumers appear resilient for now.

That has left gold in a difficult position. The geopolitical risk remains, but investors do not yet see enough reason to move heavily back into safe-haven assets.

The WGC said gold is technically vulnerable in the near term, although the long-term uptrend has not broken.

March’s decline held support near the 200-day average and the $4,075 an ounce retracement level. But the rebound has stalled below the 55-day average, raising the chance of another test of support.

A sustained move below $4,075 an ounce would suggest a more serious technical top, according to the report.

Higher-for-longer US rate expectations are another drag. Gold does not pay interest, so delayed rate cuts make it less attractive compared with yield-bearing assets. Stronger US equity expectations also reduce the urgency for investors to hold gold.

The WGC said the current calm could still prove fragile.

Oil markets are still pricing stress from the crisis, with Brent and WTI December contracts trading at a 22% to 25% premium compared with pre-crisis levels. The report also cited J.P. Morgan estimates that the operational floor for global oil inventories could be reached by September if the situation remains unresolved.

That could bring back inflation pressure, weaken growth expectations and revive demand for gold.

The longer-term case also remains supported by central bank buying, elevated debt levels, fiscal deficits, dollar diversification and the reduced reliability of bonds as portfolio protection during inflationary shocks.

Gold market may stay choppy until there is a clearer signal. A fresh spike in oil prices, renewed inflation concern, a weaker dollar or stronger demand from investors could push gold higher again. A calmer market, delayed US rate cuts and stronger equities could keep pressure on prices.

That means jewellery shoppers may want to track daily price moves closely, while investors may need patience. The WGC’s view suggests gold still has long-term support, but the next move may depend on whether markets are right to treat the Middle East crisis as temporary.