Gold fell to about $4,460 in early Asian trading on Monday. It stayed under pressure as the US Dollar strengthened, bond yields rose, and inflation worries grew due to higher energy prices. Conflict in the Middle East has lifted energy prices and lowered expectations for US rate cuts. The Federal Reserve kept rates at 3.50% to 3.75% after its March meeting, and the median dot plot still points to one 25-basis-point cut in 2026, while some officials now expect no cuts this year.

Central Bank Demand Supports Gold

Central bank buying may support gold demand. China’s official gold reserves rose to a record 2,309 tonnes after 16 straight months of purchases by the People’s Bank of China. Central banks are the largest holders of gold and added 1,136 tonnes worth about $70 billion in 2022, according to the World Gold Council. Gold often moves opposite to the US Dollar and US Treasuries, and it can also move against risk assets such as stocks. Gold prices can react to geopolitics, recession fears, and interest rates, as it offers no yield. Because it is priced in dollars, shifts in the US Dollar can affect XAU/USD. With gold tumbling to $4,460, the immediate outlook is pressured by a strong US Dollar. The Dollar Index (DXY) is approaching 108, a multi-year high, which makes the dollar-denominated metal more expensive for foreign buyers. Given this momentum, we see traders considering put options or shorting futures to hedge against or profit from a potential slide towards the $4,300 support level in the short term.

Rates Yields And Gold Pressure

The Federal Reserve’s decision to hold rates at 3.50-3.75% and signal only one potential cut this year makes holding a non-yielding asset like gold costly. We’ve watched the 10-year US Treasury yield hold firm above 4.5%, directly competing with gold for safe-haven capital. This high opportunity cost is a key factor weighing on the metal, suggesting any rally will face significant headwinds. Ongoing geopolitical tensions have pushed Brent crude oil prices above $110 a barrel, but the market is focusing more on the inflationary impact than on gold’s safe-haven appeal. This inflation concern is what is keeping the Fed’s stance hawkish, creating a feedback loop that strengthens the dollar and weakens gold. Traders should therefore remain cautious, as the usual geopolitical bids for gold are being overshadowed by monetary policy concerns. On the other hand, we must not ignore the significant underlying support from central bank buying. China’s gold reserves have now swelled to over 2,800 tonnes after its continued purchasing program, providing a solid floor for prices. We remember the World Gold Council data from late 2025 showing that central banks collectively bought over 1,000 tonnes for the third consecutive year, a trend that limits how far the price can fall. This tug-of-war between a hawkish Fed and strong official sector demand is creating significant market volatility. The CBOE Gold Volatility Index (GVZ) has climbed to its highest level since the banking turmoil we saw back in 2024. For derivative traders, this suggests that strategies like straddles or strangles could be effective to capitalize on sharp price swings in either direction over the coming weeks. Create your live VT Markets account and start trading now.

Start trading now – Click here to create your real VT Markets account