29.04.202612:42 Forex Analysis & Reviews: Gold struggles to sustain momentum despite record demand

According to the World Gold Council, demand for the precious metal reached a historic $193 billion in the first quarter, marking a rise of 2% in physical terms to 1,231 tons. Commodity markets are cyclical, and rising prices often lead to a decrease in consumption. The jewelry sector responded first, with demand plunging by 23% to 300 tons. In contrast, interest in investment increased, which helped keep XAU/USD afloat for a time. However, ahead of the April FOMC meeting results, gold prices have collapsed.

From January to March, central bank demand for bullion increased modestly by 3%. Countries such as Poland, Uzbekistan, and China were net buyers, while Azerbaijan and Russia reported sales. Capital flows into ETFs were mixed: March saw outflows, but the first quarter overall recorded a modest gain.

Oil and gold performance

Gold continues to be pressured by the ongoing conflict in the Middle East. The issue is not solely the strength of the US dollar as a safe-haven asset, but it is also linked to rising oil prices, accelerating inflation, and central banks' intentions to tighten monetary policy. This scenario leads to higher Treasury yields. Since gold does not pay interest, it struggles to compete with Treasuries when rates are on the rise.

The outlook for XAU/USD is growing gloomy, with the World Bank forecasting an average gold price of $4,700 per ounce in 2026, followed by a further decline of 7% in 2027. However, opinions vary widely. Goldman Sachs, for example, forecasts a return of the precious metal to $5,400 by the end of the year, driven by two rounds of monetary expansion from the Fed and increased central bank demand for bullion. Meanwhile, Amundi projects prices rising to $5,500 within 12 months, arguing that the acceleration in inflation will be temporary, allowing the Fed to consider easing monetary policy.

Thus, in the medium to long term, gold may still have a fighting chance. For now, it remains under pressure due to expectations of hawkish rhetoric from Jerome Powell during the press conference following the April FOMC meeting. If investors hear that the Fed is abandoning rate cuts, the US dollar is likely to strengthen, Treasury yields will rise, and XAU/USD may decline.

Additionally, Powell's intention to remain a member of the FOMC until 2028 could work against the precious metal. In this scenario, Donald Trump's ambitious plans to fill the Federal Open Market Committee with "doves" may not materialize. Kevin Warsh's dreams of reshaping the Fed may also need to be postponed.

From a technical perspective, the daily gold chart indicates a divergence from moving averages and fair value, suggesting a strengthening of bearish positions. A drop below $4,550 or a rebound from $4,640 per ounce could trigger sell signals.