Gold’s Price Anchored by Western Flows as Geopolitical and Policy Risks Simmer

The gold market is being pulled by a new dominant force. While geopolitical tensions and Federal Reserve uncertainty provide the volatile backdrop, a decisive shift in capital flows is currently setting the price. The premium for physical gold in Shanghai has collapsed to just $1 per ounce over the European spot price, down from $12 a week ago, signaling that Western investment demand has overtaken Asian buying as the primary short-term driver.

This shift comes as the metal consolidates around $4,700 per ounce, navigating a dense thicket of unresolved crises. The immediate geopolitical focus remains the strained situation in the Middle East. Although President Donald Trump extended a ceasefire with Iran, a second round of negotiations has failed. Tehran refuses to reopen the critical Strait of Hormuz to shipping, and maritime authorities have reported attacks on several freighters by Iranian Revolutionary Guards. In response, Vice President JD Vance canceled a crisis trip to Pakistan. Since the conflict began, gold has shed roughly ten percent of its value, though it remains up about nine percent for the year.

Simultaneously, a leadership vacuum is brewing at the U.S. central bank. The confirmation process for Fed Chair nominee Kevin Warsh, who promises a radical policy shift, is stalled. Republican Senator Thom Tillis is blocking the Senate process, demanding an end to investigations related to a construction project at the Fed’s headquarters. During his hearing, Warsh pledged central bank independence and called for a new framework to tackle persistent inflation, though he provided few details. His proposed changes include reducing the number of policy meetings.

The market’s attention now turns to the next Federal Open Market Committee gathering on April 28 and 29. Virtually no one expects a rate cut at that meeting, with CME Group data putting the probability of unchanged rates at 99.5 percent. This expectation caps gold’s near-term upside potential, according to analysts.

Should investors sell immediately? Or is it worth buying Gold?

Beneath these headwinds, structural support for gold remains firm, albeit from a broader base. Global central bank purchases slowed to just five tonnes in January, down from the prior year’s average. However, new buyers like Malaysia and South Korea are replenishing reserves. Most notably, the People’s Bank of China bought five tonnes in March—its 17th consecutive monthly purchase and the largest addition since February 2025. Chinese gold ETFs have also seen inflows for seven straight months.

This consistent institutional accumulation provides a floor for prices. For the year, gold is still up approximately 43 percent. Goldman Sachs reaffirms its bullish long-term outlook, maintaining a price target of $5,400 per ounce by the end of 2026. The firm’s analysts cite ongoing central bank purchases of around 60 tonnes per month and expectations for two U.S. interest rate cuts later in the year as key pillars for their forecast.

Traders are awaiting fresh U.S. economic data on Thursday, including purchasing managers’ indices and labor market figures, for short-term directional cues on the dollar. The ultimate near-term catalyst, however, may come from overseas. The next major move for gold could hinge on a new proposal from Tehran, which would force an immediate repricing of the geopolitical risk premium currently embedded in the market.