Both gold and silver have shed 11% and 13% respectively since the conflict in the Middle East began.
Precious metals markets have entered a period of consolidation since the beginning of April, with gold prices stabilizing after a period of heightened volatility now trading within a well-defined range.
While macroeconomic and geopolitical uncertainty remains elevated, the absence of a clear directional driver has left bullion largely range bound. The constant flip flopping between the United States and Iran as it relates to the Strait of Hormuz, has created a fatigue in investment markets, which are now arguably underestimating event risk.
Gold has continued to oscillate between USD $4,600 and USD $4,900 per troy ounce (oz) over recent weeks, currently holding near the mid-point of this range at USD $4,729oz.
Silver has similarly tracked sideways, trading at USD $77.6oz at the time of writing, though continues to exhibit higher volatility relative to gold as one would expect.
Both gold and silver have shed 11% and 13% respectively since the conflict in the Middle East began.
This price action reflects a market in equilibrium, where on one hand, persistent geopolitical tensions, ongoing central bank demand and elevated fiscal deficits continue provide underlying support.
On the other hand, a firm US dollar and still-elevated real yields are limiting upside potential in the near term, while liquidity needs may still see gold come under short-term pressure if financial markets tighten in response to the crisis.
From a macro perspective, US Treasury yields remain restrictive, with the 10-year yield holding above 4.2% (currently 4.3%) and real yields near recent highs (currently 1.92%).
This has reinforced the opportunity cost of holding non-yielding assets like gold, dampening investor appetite despite ongoing uncertainty. Concurrently, the US Dollar Index (DXY) has remained resilient above 98 as the markets risk-off sentiment has had investors flocking to the USD, limiting gains in precious metals.
Additionally, gold backed ETFs flipped from buying 146 tonnes over January and February to selling 83 tonnes in March as expectations around fed rate cuts evaporated.
Early estimates for April suggest this trend has since reversed again, with ETF purchases upwards of 60 tonnes estimated month to date (World Gold Council), with a clear diversion between Western (mostly selling) and Eastern (mostly buying) emerging.
Importantly, market pricing for monetary policy continues to shift, with expectations now centered on a delayed and more gradual easing cycle, with traders not pricing in any further rate cuts by the fed until April 2027 (CME Group).
Until there is a decisive shift in the US-Iran conflict, a move lower in either yields or the dollar, gold is likely to remain range bound in the near term, with intermittent volatility expected.
Periods like this, while not as exciting for many investors relative to what we saw in the run up to the January highs, are often the best times to acquire the metals, with much of the froth removed from the market, while the long-term outlook for both and gold silver remains as robust as ever.
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