Gold prices remain stable amid geopolitical tensions and market dynamics

By Newsdesk

May 08 2026
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April 2026 saw the gold market in a state of equilibrium as the precious metal ended the month flat at US$4,611 per ounce. Despite the geopolitical tensions stemming from the Middle East crisis and the closure of the Strait of Hormuz, gold prices were buoyed by a weaker US dollar and strong inflows into global gold exchange-traded funds (ETFs), particularly from Europe. However, the market's risk appetite and a reduction in volatility kept a lid on significant gains for gold, as investors appeared to treat the geopolitical disruptions as temporary.

Gold prices remain stable amid geopolitical tensions and market dynamics

According to the Gold Return Attribution Model (GRAM), the decline in market volatility, as investors embraced risk, was a significant factor in keeping gold prices stable. The GRAM indicated that while this decline was a negative contributor, it was offset by robust ETF inflows and a moderately weaker US dollar. The inflows were largely driven by European investors, who were concerned that the region might be more severely impacted by the Hormuz closure. Asia and the US also contributed to the inflows, albeit to a lesser extent.

"Markets appear to be treating the Middle East crisis and Hormuz shutdown as transitory," noted an analyst. "The shock has been large, but markets are not extrapolating it into a meaningful shift in inflation or growth…yet."

In the US, near-term inflation breakeven rates initially spiked as the crisis unfolded but have since retraced much of the increase. US equities have rallied strongly, reflecting a return of risk appetite, while options markets have remained relatively calm. This sentiment was echoed by another market expert who observed, "US markets are treating the shock as containable. Equity and bond volatility premia have eased – breakeven inflation rates have retraced; safe-haven appeal has diminished."

Despite the ongoing crisis, the US appears relatively insulated from the energy shock, with consumers showing resilience. This has created a dilemma for investors, as the unfolding geopolitical crisis has not yet provided the impetus to tactically shift into gold. The market is caught in a tug-of-war between short-term pressures and longer-term structural support for gold.

From a technical perspective, gold remains vulnerable, although the long-term uptrend is not yet broken. March's decline held key support near the 200-day average and the US$4,075/oz retracement level, but the rebound has stalled below the 55-day average. "A renewed 200-day test looks likely; only a sustained break below US$4,075/oz would confirm a more serious technical top," commented a market strategist.

Meanwhile, the Federal Reserve's policy stance has become less favourable for gold, with futures pricing indicating higher-for-longer interest rates. US equities have also shown a strong earnings outlook, further diminishing gold's safe-haven appeal. Central bank demand for gold remains solid, although the crisis has highlighted gold's role as a liquidity source during times of stress. Concerns about potential official-sector sales or swaps could pose a headwind while the Hormuz disruption persists.

In the ETF market, global investors rotated back into gold ETFs in April, following significant outflows in March. Global physically backed gold ETFs recorded inflows of US$6.6 billion during the month, with all regions registering positive flows. European funds led the charge with an inflow of US$3.7 billion, flipping their year-to-date total from negative to positive. The UK, Switzerland, and Germany were significant contributors to this surge, as investors assessed the inflationary implications of the prolonged Iran conflict.

In Asia, gold ETFs extended their inflow streak to eight months, adding US$1.8 billion in April. China led the region, with funds in Hong Kong SAR adding US$732 million, supported by new product listings. India also recorded positive flows for the 11th consecutive month, attracting US$297 million.

Trading activity in the global gold market normalized in April, with trading volumes falling 24% month-on-month to US$398 billion per day. Despite this decline, volumes remained above the 2025 average, indicating ample market liquidity. Over-the-counter volumes and exchange trading activities both experienced slower trading, although they stayed above their respective 2025 averages.

As the market navigates these dynamics, the outlook for gold remains uncertain. While short-term pressures persist, the potential for a swift return to support is evident if the geopolitical shock proves less temporary than currently assumed. The structural factors supporting gold, such as central bank buying, elevated debt levels, and fiscal deficits, continue to underpin the market's longer-term prospects.

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