Short-Term Weakness Hits Gold, but Long-Term Demand Remains Firm

The gold and silver markets faced a challenging week as macroeconomic pressures and shifting monetary policy expectations weighed on sentiment. Gold prices declined below US$4,600/oz, briefly trading in the US$4,540–$4,570 range before a modest recovery toward US$4,616. The pullback reflects a broader trend driven by a stronger US dollar, rising Treasury yields, and fading expectations for near-term Federal Reserve rate cuts amid persistent inflation concerns.

Higher energy prices—linked to ongoing geopolitical tensions in the Middle East—have intensified inflation risks, reinforcing a “higher for longer” interest rate outlook. This environment has reduced the appeal of non-yielding assets like gold, even as geopolitical uncertainty remains elevated. Silver followed gold lower, with more pronounced volatility due to its dual role as both a precious and industrial metal, making it more sensitive to shifting growth expectations.

Despite short-term weakness, underlying demand for gold remains robust. Global Q1 demand reached 1,231 tonnes, up 2% year-over-year, while the total value surged 74% to a record US$193 billion. Investment demand was a key driver, with bar and coin buying rising 42%, led by strong Asian demand. Central banks also remained consistent buyers, adding 244 tonnes during the quarter.

ETF flows were more mixed, with early-quarter inflows offset by US-based outflows in March. Meanwhile, jewellery demand declined in volume terms due to high prices, although overall spending increased.

Looking ahead, gold appears to be in a consolidation phase, with key support near US$4,500. While near-term pressures persist, strong investment demand, central bank buying, and ongoing geopolitical risks continue to support a constructive longer-term outlook for both gold and silver.