Gold Caught in a Dollar Trap as Geopolitical Tensions Fail to Ignite a Rally

Gold is heading for its first weekly decline in a month, undone not by a lack of geopolitical turmoil but by the very forces such crises typically unleash. A resurgent US dollar and stubbornly elevated bond yields are overwhelming the safe-haven bid that would normally accompany the standoff in the Strait of Hormuz.

Spot bullion was trading at $4,698 an ounce early Friday, virtually flat on the day but down roughly 1.9% for the week. The LBMA PM Fix stood at $4,712.50 on Thursday, following an AM Fix of $4,728.40. Intraday, the metal touched $4,735 before fading during the New York afternoon session.

A Clash of Conflicting Currents

The market is wrestling with two opposing forces that are effectively cancelling each other out. On one side, stalled US-Iran talks and the continued blockade of a waterway that handles roughly 20% of global oil shipments have kept Brent crude above $100 a barrel. That energy shock is fanning inflation fears—typically a tailwind for gold as a store of value.

Yet the same uncertainty is driving investors into the dollar. The DXY index has climbed to a two-week high of 98.82, making dollar-denominated gold more expensive for overseas buyers. The 10-year US Treasury yield, holding steady at 4.33%, adds another layer of pressure by diminishing the appeal of a non-yielding asset.

Compounding the headwinds is the shifting rate outlook. With the Federal Reserve’s FOMC meeting scheduled for April 28-29, markets now assign just a 26% probability of a rate cut before the end of 2026. The “higher for longer” narrative remains firmly in place, reinforced by incoming Fed Chair Kevin Warsh’s hawkish tone during his Senate confirmation hearing, where he called for a tighter inflation mandate and a departure from unconventional policy tools.

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Technicals Point to a Pivotal Moment

The $4,700 level has hardened into a key support zone. A sustained break below that threshold would expose the next floor near $4,675, with a close beneath that on an hourly basis potentially triggering further declines toward $4,671. To the upside, gold must first clear the supply zone around $4,735, which coincides with the 100-day moving average.

The daily Relative Strength Index sits near 47, indicating neither overbought nor oversold conditions. Bollinger Bands are contracting, a classic setup that often precedes a sharp directional move.

Corporate Earnings and Data in Focus

After the US market close, attention shifts to Newmont, the world’s largest gold producer, which is set to report first-quarter results. Analysts expect a significant earnings jump, but investors will be scrutinizing margins to see whether the elevated gold price is outpacing rising operational costs in the mining sector.

Fresh labor market data could provide near-term direction. Weekly initial jobless claims came in at 214,000, higher than anticipated—a sign the jobs market may be cooling slightly, which could cap further yield increases. Unless the dollar retreats below 98.50 or there is a tangible de-escalation in the Middle East, gold is likely to end the week in consolidation mode.

Looking ahead, US purchasing managers’ indices and additional employment data are due in the coming days, but the main event remains the Fed’s rate decision on April 29. Before the escalation in the Strait of Hormuz, traders had been pricing in two rate cuts this year; now, barely any are expected. For gold, that shift in expectations may prove more consequential than the conflict itself.