Gold prices are expected to continue experiencing volatility in the near term, according to Praveen Singh, Head of Currencies and Commodities at Mirae Asset ShareKhan. Spot gold tumbled on Monday as oil prices surged amid escalating geopolitical risks in the Middle East.
Gold Price Performance
At the time of writing, the metal was trading at $4,524, down by $90 (approximately 2%) for the day, as the US Dollar Index, US yields, and oil prices climbed. The yellow metal closed with a weekly loss of 2% in the week ending May 1, marking its second consecutive weekly decline.
Geopolitics and Oil
Critical energy infrastructure and tankers in the Middle East came under attack once again on May 4, as an Iranian drone strike caused a fire in a key oil industrial zone in the United Arab Emirates city of Fujairah, a major hub for crude oil and fuels. This location is strategically important for both the UAE and global markets due to its position outside the Strait of Hormuz.
Oil prices were already mostly higher on May 4 on reports of more tankers coming under fire in the Strait of Hormuz. Earlier, the head of the Iranian parliament’s National Security Commission called US plans to try and restore transit through the strategic waterway with the help of the military starting Monday a violation of a fragile ceasefire.
Treasury Secretary Scott Bessent stated that the US is suffocating Iran with economic and financial pressure, and believes Iran’s oil industry may need to start shutting in wells within a week as the country's crude storage fills up rapidly. The US and Iran remain at odds over the critical issue of nuclear enrichment.
Data Roundup
US ISM manufacturing Index data released on May 1 showed expansion for the fourth straight month in April, though the index at 52.7 lagged the estimate of 53.5. ISM prices climbed to 84.6, a four-year high, while the employment Index continued to contract. Data released on Monday showed that US factory orders rose 1.5% month-over-month in March 2026, versus the forecast of 0.5%.
Dollar Index and Yields
At the time of writing, the US Dollar Index at 98.49 was up by 0.50% for the day as US yields spiked on inflation concerns. Two-year yields at 3.97% were up by 2.38% for the day, while ten-year US yields at 4.45% were up by 1.90% for the day. Both two-year and ten-year yields touched the highest level since March 27.
Fed Rate Cut/Hike Chances
Implied overnight rates price in 0.33 rate hikes by the year-end, as opposed to a 0.05 rate cut seen on May 1. Rates are now pricing in 0.79 rate hikes by April 2027, a sharp rise from pricing 0.22 rate hikes as of May 1.
Gold ETF Holdings
Total known global gold ETF holdings stand at 98.66 million ounces, down by 0.29 million ounces year-to-date. Global gold ETF holdings rose 0.89 million ounces in April as lower prices lured buyers; however, gold holdings have fallen by 2.26 million ounces since the Iran war broke out on February 28.
CFTC Positioning
In the week ending April 28, money managers decreased their bullish gold bets by 3,924 net-long positions to 91,574, the least bullish in more than two years, according to weekly CFTC data on futures and options. Short-only positions rose 2,298 lots to 32,708, the highest in more than six months.
Upcoming Data and Reports
Major US data on the deck this week include the April ISM services Index (May 5), March JOLTs job openings (May 5), April ADP employment change (May 6), May University of Michigan Sentiment and inflation expectations, and April nonfarm payroll (May 8). China's services and composite PMIs will be released on May 6. Investors will also monitor Eurozone's manufacturing PMI (May 4) and services PMI (May 6). The Bank of Japan's March meeting minutes will be released on May 7.
Gold Price Outlook
Gold is vulnerable as US yields spike higher due to surging oil prices stoking inflation risk. Fed rate cut probability has been priced out as of now, though the situation may change should oil prices fall on a sustainable basis soon. However, this is possible only if the US and Iran agree to an amicable deal, a low-probability event given their stark differences over Iran’s nuclear enrichment.
Investors will closely monitor the upcoming US monthly job report to be released on May 8. A decent job report will weigh further on gold prices. Should the support at $4,500 break, the next key support at $4,410 will emerge as the immediate downside target for bears. Interim support is at $4,452. Resistance is at $4,603, $4,670, and $4,705.
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