According to TD Securities’ Head of Commodity Strategy, Bart Melek, gold is currently under pressure due to oil-driven inflation, which is keeping real interest rates elevated and increasing the opportunity cost of holding the metal [1]. Melek highlights that demand from institutional investors, ETFs, and central banks has weakened since the start of the war, with technical support for gold seen near the 200-day moving average at approximately $4,258 [1].
Melek notes that gold typically benefits from rising inflation, but only when monetary policy is not actively suppressing inflation through higher real rates. The current environment, marked by a negative supply shock, suggests that policy may remain restrictive, resulting in high real carry and further discouraging gold investment [1]. Since the conflict began, gold has declined by roughly $700 per ounce (–13%), silver by $21 per ounce (–22%), while copper has remained flat despite a market deficit [1].
Some central banks have reportedly slowed their gold purchases due to liquidity constraints related to the war and may be waiting for lower price levels near technical support before resuming buying [1]. Melek warns that an oil price spike to $150 per barrel could push gold down to the $4,258 support level [1]. However, he maintains that as long as this support holds, the longer-term uptrend for gold remains intact, with a potential recovery toward the $5,200 range by year-end if oil markets stabilize and inflation signals decrease [1].
CONCLUSION
Gold is currently weighed down by high real rates and weakened demand from key market participants, with technical support seen near $4,258 per ounce. While further downside is possible if oil prices spike, TD Securities anticipates a recovery toward $5,200 by year-end should inflationary pressures ease and oil markets stabilize.