05/06/2026 07:48 AST
Gold prices advanced sharply on Thursday, with the metal benefiting from a weaker dollar and falling bond yields as easing oil prices fuelled optimism around a potential de-escalation in the Iran conflict. Investors turned to bullion as shifting geopolitical signals and softer energy markets rippled through currency and fixed-income markets.
Spot gold rose 1.7 per cent to $4,505.35 per ounce by mid-morning US trading, while US gold futures for August delivery climbed 1.5 per cent to $4,532.80, according to Reuters data. The move highlights how closely gold continues to track macroeconomic expectations, particularly around interest rates, currency movements and geopolitical risk.
Despite the latest uptick, gold's broader trajectory has been shaped by deeper structural forces, with central bank demand emerging as a key long-term pillar of support. Analysts say this institutional buying trend is increasingly outweighing traditional drivers such as short-term inflation fears or speculative flows.
"Gold is often discussed through the lens of inflation, interest rates or geopolitical crises. Yet one of the most important drivers of the metal's remarkable performance over the past several years has been far less visible: central banks," said Daniela Hathorn, senior market analyst at Capital.com.
Central banks, unlike private investors, tend to operate on longer time horizons, buying gold as part of strategic diversification rather than reacting to short-term volatility. This behaviour has kept demand resilient even at elevated price levels, raising questions about how policymakers view the global financial system.
According to Hathorn, reserve managers are increasingly reassessing the risks associated with traditional assets such as sovereign bonds, particularly in a more fragmented geopolitical environment. The freezing of Russia's foreign reserves in 2022 marked a turning point, highlighting the vulnerability of assets held within the global financial system and prompting a shift toward assets that carry no counterparty risk.
"Gold, unlike foreign currency reserves held abroad, cannot be frozen, sanctioned, or restricted by another government," she said, noting its growing appeal as a tool of financial sovereignty.
Market participants say this shift is especially pronounced among emerging-market central banks such as China and India, which have historically held lower proportions of gold and are now diversifying more aggressively. Rather than replacing the U.S. dollar, the trend reflects a broader move toward spreading reserve risk in an increasingly uncertain world.
From a market perspective, however, gold's recent price action reflects a more mixed picture. Ole Hansen, Head of Commodity Strategy at Saxo Bank, said bullion has faced headwinds in recent months despite its longer-term strength. "Since hitting a record peak near $5,600 in late January, gold has endured a challenging period, with prices falling for a third consecutive month in May, albeit by less than 2 per cent," Hansen said, adding that shifting attention toward energy markets and their impact on inflation and interest rates had weighed on prices.
He noted that "despite the recent pullback, bullion remains up 5 per cent so far in 2026, 36 per cent over the past year and 91 per cent over the last two years," underscoring the strength of the longer-term trend.
Hansen added that geopolitical developments continue to reinforce gold's strategic appeal. "Concerns about sanctions risk, reserve diversification, fiscal sustainability, and long-term currency debasement continue to encourage central banks to reduce reliance on traditional reserve assets. We therefore expect central banks to remain net buyers over the coming year."
Technically, gold has also shown signs of underlying resilience. "The market has tested [the] 200-day moving average.twice during the recent correction and each time attracted renewed buying interest," he said, pointing to continued participation from long-term investors even during periods of weakness.
Short-term trading signals, however, remain cautious. Vijay Valecha, Chief Investment Officer at Century Financial, said gold is still navigating a fragile near-term environment.
"Technically, gold continues to trade within a weak near-term, with immediate support seen near $4,430, followed by stronger downside support around $4,369," Valecha said, referring to recent price levels. On the upside, he identified resistance near $4,570, with a sustained recovery potentially opening the move toward $4,750.
Silver, meanwhile, has remained relatively range-bound, with support around $71 and resistance near $78, according to Valecha. A break above that level could push prices toward $80, he added.
Looking ahead, analysts say gold's outlook will continue to be shaped by a combination of macroeconomic shifts and structural demand. While interest rates, inflation expectations and currency movements will drive short-term fluctuations, central bank buying is increasingly anchoring the market's long-term direction.
As Hathorn put it, central banks are not positioning for a single outcome but preparing for a world marked by "persistent fiscal deficits, rising government debt, geopolitical fragmentation, trade realignment and periodic inflation shocks."
Khaleej Times
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