Gold Caught Between Hawkish Fed Bets and Geopolitical Heat as Central Bank Buying Fails to Stem Losses

The yellow metal is in an unusual predicament: escalating Middle East tensions and record central bank accumulation would typically provide a powerful floor, but a shockingly strong US jobs report has shifted the narrative squarely toward tighter monetary policy. Gold opened the week at $4,293.50 an ounce, down roughly $34.50 from Friday’s close, and has since recovered slightly to trade around $4,350. That still leaves the metal nursing a near?4% loss over the past seven days and virtually flat since the start of the year.

The trigger was unmistakable. The US economy added 172,000 jobs in May, more than double the 85,000 economists had penciled in. Revisions to March and April added another 93,000 positions, while the unemployment rate held at 4.3% for the third consecutive month. Markets quickly repriced Federal Reserve expectations: there is now roughly a 70% probability of a rate hike before year?end. Rising yields on ten?year Treasuries have jacked up the opportunity cost of holding a non?yielding asset, and gold has been the casualty.

Geopolitical risk, meanwhile, has intensified sharply. Israel launched strikes on targets in the Beirut area for the first time since the US?brokered ceasefire with Lebanon, and Iran fired ballistic missiles at Israel. Oil prices jumped more than 2%, stoking fresh inflation fears that only reinforce the Fed’s hawkish bias. For gold, this is the worst of both worlds: safe?haven demand is being overwhelmed by the prospect that central banks will keep borrowing costs high to combat precisely those inflationary pressures.

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

China keeps buying, but jewellery demand wilts

The People’s Bank of China added another 320,000 fine ounces to its gold reserves in May, extending its buying streak to 19 consecutive months — the longest uninterrupted run since at least 2015. The PBOC has been accumulating through three straight monthly price slumps, underscoring a strategy rooted in geopolitical hedging and reserve diversification rather than short?term price calls. Yet this structural support has so far done little to arrest the slide. A report from the European Central Bank confirmed that gold has overtaken US Treasuries as the second most important reserve asset globally, accounting for 27% of total currency reserves at the end of 2025.

On the demand side, a deeper transformation is under way. Metals Focus projects total global gold demand will slip to around 4,180 tonnes in 2026, down 2%, with jewellery demand alone set to plunge as much as 11% as high prices deter private buyers. At the same time, physical investment in bars and coins is on track to overtake jewellery as the largest single demand segment for the first time in 2026. In 2025, investment demand jumped 16% to a 12?year high, led by China (up 28%) and India (up 17%). That shift from consumption to investment makes the market less price?sensitive over the long haul, but in the near term it leaves the weight of supporting the price squarely on institutional shoulders.

Technical damage and the CPI wildcard

The chart has turned ugly. Gold closed below its 200?day moving average, and the relative strength index has slid to 34.3 — uncomfortably close to oversold territory. The next support level sits around $4,250. From the all?time high of $5,626.80 struck on January 29, the metal is now more than 22% off the peak. A seasonal headwind also looms: June has historically been the weakest month of the year for gold.

All eyes now turn to Wednesday’s US consumer price index release. If core inflation prints hot, the case for a June rate hold — the current market baseline, with the federal funds rate at 3.50%–3.75% — could quickly evaporate. A break below $4,300 would open the door to a more disorderly selloff that even the PBOC’s relentless buying might struggle to contain. For now, gold remains trapped between a hawkish Fed and a volatile Middle East, with central?bank accumulation providing a floor that is starting to feel increasingly fragile.

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