Gold and Silver faced a week defined by the hawkish Fed-oil-inflation feedback loop suppressing rate-cut expectations, partially offset by yen-driven dollar weakness. MCX prices held relatively firm versus COMEX due to rupee depreciation. Physical demand and central bank buying remain structurally supportive, but near-term direction hinges on Hormuz diplomacy, incoming US payrolls (May 8), and the trajectory of real yields under incoming Fed Chair Warsh.

Geopolitical Tensions

The dominant macro narrative last week remained the US–Iran standoff. Now in its tenth week, the Middle East war has driven energy prices sharply higher and heightened inflation risks, stoking concerns that central banks may keep interest rates elevated for longer or even tighten further.

Trump confirmed the US would maintain its naval blockade on Iran until a nuclear agreement is reached, while the prolonged Middle East conflict and near-closure of the Strait of Hormuz continued to unsettle global markets. Reports of a three-stage Islamabad-brokered proposal to reopen the Strait of Hormuz stripped a portion of the “World War III” fear premium that had been keeping gold near $5,000. This created a paradoxical drag on bullion: higher oil kept inflation expectations elevated, which kept the Fed on hold, which kept real yields elevated, pressuring gold even as geopolitical risk classically should have supported it.

Economic Data & Fed Policy

Key macro data exerted a decisive influence. The PCE Price Index rose 0.7% MoM in March, with the yearly rate accelerating to 3.5% from 2.8% in February. Core PCE climbed 3.2% YoY, above the prior month’s 3.0%. The advance Q1 2026 GDP estimate showed 2.0% annualized growth, a notable pickup from the revised 0.5% in Q4 2025.

Fed held rates at 3.50–3.75% with four hawkish dissents. Rate-cut probability near zero — negative for metals. The Federal Reserve left policy settings unchanged as widely expected, though four officials dissented — highlighting deepening divisions over the outlook amid Iran-driven uncertainty. Powell’s final meeting carried an unexpectedly hawkish tone, signaling that incoming Fed Chair Kevin Warsh (assuming the chair May 15) will prioritize aggressive inflation-targeting, which boosted the DXY and weighed on non-yielding bullion. The probability of at least one rate cut in 2026 jumped to over 15% from just 1.3% the previous day following the GDP release, providing a brief floor under prices.

BOJ Yen Intervention

BOJ flagged decelerating growth for FY2026, with CPI projected at 2.5–3.0% driven by surging Middle East-linked crude oil prices. By April 30, Japan time, the yen had weakened to 160 per dollar — its weakest level since July 2024 — prompting authorities to intervene in the foreign exchange market by buying yen and selling dollars. The Japanese Ministry of Finance intervened on April 30 and May 1, 2026, with the scope of action estimated to potentially exceed $30 billion. The move successfully triggered a sharp 2.2% rally in the yen, driving USD/JPY down toward the 156 range. The intervention caused a sharp yen rally, which pushed the DXY to a two-month low — the primary catalyst behind gold’s near-2% intraday rebound on Friday, May 1, partially recovering what had been a tough week for bullion.

Dollar Index & USDINR

The DXY hovered at a two-month low by Friday, pressured by a sharp yen rally following suspected Japanese currency intervention. Entering the FOMC week, the dollar index had held above 98.5, with 10-year Treasury yields running between 4.3–4.4%.

On the USDINR front, the rupee remained under meaningful pressure. The Indian rupee slipped to around Rs 94.7/USD, hitting a one-month low as elevated oil prices and a sustained imbalance in dollar flows strained currency markets. Over the past seven sessions, the rupee fell approximately 1.7%. Oil importers’ strong dollar demand, combined with exporters’ hesitancy to sell holdings amid depreciation expectations, widened the current account pressure. A projected capital inflow shortfall of $40–$50 billion for the fiscal year. The RBI was reported to be selling dollars intermittently to curb volatility. A weaker rupee structurally cushions MCX prices against COMEX declines — the primary reason MCX levels held relatively firm even as COMEX softened.

ETF Demand

Global ETF flows remained mixed with regional divergence. Global gold ETFs ended Q1 with $606 billion in AUM, 9% above FY25 levels, though March saw the largest monthly decline since September 2022. North America recorded sizeable outflows of $13 billion in March, ending a nine-month inflow streak. US-listed bullion ETFs posted redemptions of over $12.7 billion in March’s first four weeks, while Chinese gold funds posted net inflows of $1.1 billion, illustrating gold’s bifurcated global demand base. Last week’s ETF outflows were the first since early April, breaking a three-week inflow streak — a technically negative signal heading into May.

In India, gold ETFs recorded net inflows of RS 31,561 crore in Q1 FY26 alone — the highest quarterly inflow on record — driven by a 63% surge in gold prices and investor rotation from equities.

Central Bank Activity

WGC data confirmed that central banks increased their gold reserves in Q1 2026. Global gold demand reached a record $193 billion in Q1, with bar and coin demand totaling 474 tonnes — up 42% YoY and marking the second-highest quarterly figure on record. Initial estimates of central bank net buying in Q1 are described as reassuringly robust, with the WGC maintaining its full-year target of 700–900 tonnes, though tactical rebalancing tied to Middle East disruptions and FX management cannot be ruled out.

Retail & Industrial Demand

Jewellery demand fell to a record quarterly low in Q1 on affordability pressures, even as bar and coin investment provided a partial offset, with retail interest remaining resilient. On silver’s industrial side, fresh earnings from US AI hyperscalers — Meta, Alphabet, Microsoft, and Amazon — confirmed $715 billion in AI capex, nearly double last year’s $375 billion, underpinning structural industrial demand for silver in electronics and data infrastructure. The World Silver Survey 2026 confirmed 762 million ounces drawn from above-ground stocks over five straight deficit years, with the 2026 shortfall projected at 46.3 million ounces — the sixth consecutive annual deficit. COMEX registered silver inventory remained in stress territory, with a coverage ratio of approximately 13–14%, below the 15% threshold for six consecutive months.

Gold is expected to trade in the range of $4500-$4850 (~ Rs 148,000 -155,000). Silver is expected to trade in the range of $71-$80 (~ Rs 235,000 -255,000).