Gold Holds Weekly Gain as Inflation and Geopolitics Increase Volatility

Happy Friday, traders. Welcome to our weekly market wrap, where we take a look back at these last five trading days with a focus on the market news, economic data, and headlines that had the most impact on gold prices and other key correlated assets—and may continue to in the future.

Here’s what you need to know:

1. Gold is on track to finish the week up roughly $100/oz, but recent price action suggests the market may be settling into a range between $4,600 and $4,800/oz.

2. Friday’s inflation data showed core CPI rising to +2.6% YoY and headline CPI reaching +3.3% YoY, reinforcing gold’s inflation-hedge appeal while also reviving concerns about a possible Fed rate hike.

3. Geopolitical headlines drove some of the week’s most volatile moves, including a sharp spike in gold prices after news tied to a fragile ceasefire and shifting expectations for rates and risk sentiment.

4. With next week light on major economic data, gold may remain especially sensitive to developments in US-Iran diplomacy and other geopolitical headlines.

After taking a battering back and forth in recent periods, gold prices are poised to mark a decent gain of roughly $100/oz this week, although the last five days’ trading pattern suggests that, barring a shock of new stimulus, the yellow metal may be entering a phase of range-bound trading between $4,600 and $4,800/oz.

Traders and investors were primarily focused on the tail end of this week, with the Consumer Price Index report for March due to be released and expected to show a sharp increase in inflation pressures for the US consumer. That would mark the first sign of March’s surge in crude oil prices—a result of the US’ war on Iran further destabilizing the region and global supply chains—having painful repercussions for the world’s largest economy.

On Friday morning, the CPI data came in generally as expected: an increase to +2.6% YoY in core inflation, which was actually a shade lower than expected, while headline inflation, inclusive of food and energy costs, ripped to the highest mark in two years at +3.3% YoY.

The gold market has had a mixed and muted reaction to the news, which we predicted was likely the best reasonably possible outcome for investors in the metal. Traders have moved with two minds on gold on Friday.

On the one hand, a surge in inflation, for whatever reason, should be an additive tailwind for gold, the globe’s most preferred hedge against inflation since the advent of fiat currency. On the other hand, even if the more optimistic economists and analysts look to price in an end to the war that is directly responsible for the current inflationary surge as just around the corner, printing inflation above +3% forces the possibility of the Federal Reserve’s next move being a rate hike back into the conversation.