Gold slid after breaching its 200‑day moving average as markets repriced towards a more hawkish Federal Reserve stance, with oil-led inflation fears adding to the pressure. The move sparked rapid selling before prices steadied, having briefly dipped below USD4,300, as oil pared gains on signs of de-escalation between Iran and Israel. Higher yields and firmer US data have also reduced gold’s defensive appeal during periods of geopolitical stress.

Policy developments in emerging markets added another layer of risk. India will raise import duties on gold and silver to 15% from 6%, effective 13 May 2026, aimed at curbing imports. While central bank demand is expected to remain resilient, some EM central banks could mobilise bullion to secure USD liquidity and support currencies; Türkiye’s central bank sold or loaned around 130 tonnes to stabilise the TRY. Against that backdrop, OCBC cut its end‑2026 forecast to USD5,100/oz from USD5,350/oz, while pointing to ongoing drivers such as currency debasement, fiscal risks and geopolitical fragmentation.

Short-Term Technical Pressures and Trading Strategies

We see Gold remaining under pressure in the near term after breaking below its 200-day moving average, which is now acting as resistance around $4,400/oz. This technical breakdown has been driven by a repricing of Federal Reserve expectations following surprisingly strong economic data. The environment of higher bond yields and a firm US Dollar presents significant headwinds for the precious metal.

The robust May jobs report, which showed the US economy adding over 250,000 jobs, has pushed the 10-year Treasury yield back above 4.75%. This reinforces the market’s belief that the Fed will remain hawkish and delay any potential rate cuts until later this year or even early 2027. For derivative traders, this suggests that gold’s upside will be capped in the coming weeks.

Considering this outlook, we believe selling out-of-the-money call spreads is an attractive strategy for the next several weeks. This approach allows traders to collect premium by betting that the price of gold will not break through key resistance levels. It is a calculated way to position for a period of consolidation before the longer-term uptrend resumes.

Central Bank Demand, Risks, and Long-Term Outlook

Demand from central banks, a key pillar of support, is also facing challenges. While overall buying was resilient in the first quarter of 2026, the recent 130-tonne sale from Türkiye to defend the Lira shows how emerging market currency stress can lead to gold liquidation. We are monitoring this trend closely, as further sales could add to short-term price weakness.

Despite these immediate headwinds, we believe the structural case for gold remains intact due to ongoing geopolitical fragmentation and long-term fiscal risks in major economies. Therefore, we would view any further dips toward the $4,200 support level as a strategic opportunity to buy longer-dated call options. This allows positioning for the eventual rally while limiting initial capital risk.

This short-term pressure has led us to lower our year-end 2026 forecast slightly to $5,100/oz. This situation is reminiscent of the 2018 tightening cycle, where gold faced initial weakness from a hawkish Fed before ultimately embarking on a major multi-year rally. We anticipate a similar pattern to unfold, where the current consolidation period will lay the groundwork for a significant move higher.