Gold price (XAU/USD) fell to around $4,800, breaking a two-day winning streak during the early Asian session on Thursday [1]. The decline was driven by surging oil prices, which have heightened energy inflation concerns and reduced expectations for interest rate cuts, making gold less attractive as it does not yield interest [1]. Although ongoing tensions in the Middle East initially spurred a safe-haven rush, that momentum faded as oil prices climbed [1]. Bloomberg reported that the US and Iran are considering a two-week ceasefire extension to facilitate peace negotiations, but tensions remain high, especially over the Strait of Hormuz, which has been effectively shuttered for nearly seven weeks since the start of the war [1].
Despite the downward pressure, higher demand from major central banks could offer some support to gold. The People’s Bank of China (PBoC) has extended its gold purchasing streak to 18 consecutive months through March 2026, signaling a structural shift as institutions prioritize de-dollarization and diversification amid rising global instability [1]. Central banks added 1,136 tonnes of gold worth around $70 billion to their reserves in 2022, marking the highest yearly purchase since records began, with emerging economies such as China, India, and Turkey rapidly increasing their gold reserves [1].
Gold is widely regarded as a safe-haven asset and a hedge against inflation and depreciating currencies, but its inverse correlation with the US Dollar and US Treasuries means it tends to weaken when interest rates are high or risk assets rally [1]. Traders are expected to closely monitor geopolitical developments and economic indicators for further direction [1].
CONCLUSION
Gold's drop to $4,800 reflects the market's concern over rising oil prices and inflation, which are dampening hopes for interest rate cuts. While central bank demand, especially from China, may provide some support, the immediate outlook remains pressured by geopolitical tensions and shifting monetary policy expectations.