Sive Morten
Special Consultant to the FPA
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FUNDAMENTALS
Gold market right now is less sensitive to statistics, although a minor upside reaction on weaker GDP still happened. But mostly is driven by fiscal factors, such as a liquidity, concern over stagflation scenario and results of oil crisis on global consumption. In general, this situation totally fits to our mid term expectations as we discussed it last time.
MARKET OVERVIEW
Gold inched up on Friday, reversing earlier losses of more than 1%, on hopes for a breakthrough to end the Iran war after Tehran submitted a new proposal for negotiations, easing some inflation concerns, but remained on track for a second straight monthly decline as inflation concerns amid the ongoing Iran war clouded the outlook for interest rate cuts.
The US dollar fell against a basket of other currencies, following speculation Japan is intervening in the foreign-exchange market to support the yen.
Oil prices dropped on the news, though they remained on track for weekly gains, continuing to fuel concerns about a global economic slowdown and surging inflation as fuel prices climb. Rising costs could prompt central banks to keep interest rates higher for longer, weighing on non-yielding assets such as gold as investors turn to alternatives like Treasury yields. The U.S. Federal Reserve kept interest rates unchanged this week and struck a hawkish tone that saw markets abandon expectations for a rate cut this year. Axios reported earlier that US military commanders would brief Trump about military options, signaling a resumption of combat operations is under consideration. Iran remained defiant.
Bullion fluctuated between gains and losses, ultimately closing little changed and marking a second consecutive weekly decline. Elsewhere, the dollar erased earlier losses to end the day slightly higher after Trump threatened to hike tariffs on EU-made automobiles. A stronger greenback makes precious metals more expensive for most buyers. Still, most analysts are bullish on the precious metal, with the latest data by the producer-funded World Gold Council showing that central banks added gold holdings in the first quarter at the fastest pace in more than a year.
Central banks added gold holdings at the fastest pace in more than a year in the first quarter, as a slump in prices encouraged a wave of buying that more than offset sales by a handful of institutions. Net official-sector purchases totaled 244 tons in the three months, up from 208 tons in the previous quarter, according to estimates from the World Gold Council, an industry body. But much of the central-bank buying included in the WGC’s figures isn’t disclosed, and not included in International Monetary Fund statistics.
Tether Holdings SA bought more than six tons of gold for its reserves in the first three months of the year, extending a buying streak that’s made it the largest known holder of bullion in the world outside of banks and nation states. The value of the crypto giant’s gold reserves stood at $19.8 billion at the end of March, according to a quarterly report on its holdings, which equates to 132 tons of bullion based on spot prices
The share of gold in India's foreign exchange reserves rose to 16.7% at the end of March, up from 13.92% at the end of September 2025, according to the Reserve Bank of India's half-yearly reserves management report released on Thursday. More than two-thirds of India's gold reserves are now held domestically, data from the central bank showed. Over the past two years, India has brought back a sizeable share of its gold previously held overseas.
The Fed on Wednesday kept rates on hold but raised concerns about inflation. Meanwhile, the Bank of England also kept rates on hold and set out scenarios for the economic impact of the Iran war, one of which could require a "forceful" increase in borrowing costs. Data showed the U.S. Personal Consumption Expenditures Price Index jumped 0.7% last month, the largest gain since June 2022. The increase was in line with economists' expectations.
The Fed held interest rates steady, but in its most divided decision since 1992 noted rising concerns about inflation in a policy statement that drew three dissents from officials who no longer feel the U.S. central bank should communicate a bias towards lowering borrowing costs. Traders stuck to bets the Fed will not cut interest rates this year or well into the next, after the decision. Inflation fears have flared up with global oil prices trading above $100 a barrel due to the U.S.-backed war against Iran.
Analysts at Citi said pressure to sell gold could remain strong in the very near term due to the uncertainty in the Middle East, but expect the metal to eventually regain its appeal as a safe-haven asset. Citi kept its price targets for gold unchanged at $4,300 for the next three months and $5,000 for the 6-to-12-month window.
Analysts have raised their annual gold price forecasts, a Reuters poll showed on Monday, with strong central bank demand and economic uncertainty expected to offset risks from surging inflation and hawkish policy bets. The survey of 31 analysts and traders conducted over the past three weeks returned a median gold forecast of $4,916 per troy ounce for 2026.
On silver, analysts expect the metal to average $78 per ounce in 2026.
DEUTSCHE BANK ABOUT GEOPOLITICS
So at least one question is: will this build up in gold reserves continue? And this is where an interesting new piece of research by Mallika Sachdeva and Michael Hsueh, also at Deutsche Bank, comes in. Spoiler alert: they reckon that yes, it will probably continue. Sachdeva and Hsueh look at the history of central bank gold reserves and it tells a fascinating story.
The writers note that the real turning point for gold came in the 1990s, not the 1980s. Right up until then, the share of global central bank reserves held in gold had “consistently been a larger share of reserves than the fiat dollar.” In other words, central banks held more gold than they did dollars. So what changed? Geopolitics. The Berlin Wall fell. The Japanese bubble burst. The US was left as the undisputed global hegemon. On top of that, the country had strong public finances, and inflation was under control.
This, in turn, made US Treasuries a very attractive alternative to gold. As a result, developed market central banks began to sell gold. Meanwhile, the march of trade and globalization meant that emerging market central banks built up large US dollar reserves from export revenues. As a result of all this, the value of global central bank reserves held in gold fell from about 40% in the late 1980s, to just 10% by the time of the global financial crisis in 2008.
Looked at through this lens, the key driver of the switch was not gold’s decoupling from the official global monetary system. Instead, calmer geopolitics and rapid growth in trade under a relatively benign single superpower led to the US dollar being the most desirable and convenient reserve asset to hold. Put it this way, and you start to see how this could go into reverse.
After all, geopolitics is only getting messier by the day, and while the idea of “de-globalization” is a complex topic, 2008 was a turning point, and the global trade outlook certainly isn’t forging ahead. So the rationale for US dollar reserve dominance is no longer as clear. And we’re already seeing a shift as a result. Since the financial crisis, emerging market central banks have been steady buyers of gold. They have bought around 225 million troy ounces over the past 17 years, notes Deutsche. This is more than was sold by the developed market central banks in the 1990s.
We’re now at a point where the higher volumes of gold reserves, combined with the surge in the value of those reserves, mean that gold’s share of global central bank reserves has doubled in the past four years and now stands at nearly 30%. The US dollar’s share has dropped from an early 2000s peak of around 60% to around 40% now.
So what happens next? Well, the Deutsche Bank team reckons there’s some way to go. For a start, prior to the 1990s — which in this model, looks like the outlier period, rather than a brave new era — gold’s share of global central bank reserves fluctuated between 40% and 70%. That means there’s at least another 10% to go in order to “revert to the mean”. The US has long since decided that being the global hegemon is a role it’s less keen to maintain under current conditions, it’s hard to see why an appetite for diversification among emerging central banks would lessen.
In short, if gold is on its way back as a reserve asset — and this framework implies that it never really went away, just that the 1990s was indeed an unusual and marvelous decade — then the bull market should have legs.
BIG DECISION
Oil back above $120, wheat surging, and long-term inflation expectations hitting fresh highs are sending a clear signal: price pressures are re-accelerating. At the same time, rising bond yields are sharply increasing the cost of refinancing government debt, creating a growing tension between markets and policymakers. The bond market is yelling from the rooftops that inflation is about to soar, while Long term inflation expectations just jumped to two year highs.
US wheat prices are surging. Prices have risen +30% since the start of the year, driven by persistent drought across the US Plains farming region and soaring fertilizer costs. Gas prices in the US have moved up to $4.23 per gallon, their highest level since August 2022. The 42% spike over the last 9 weeks ($2.98/gallon to $4.23/gallon) is the biggest we've seen in the past 30 years. 30-Year Treasury Yield closed at 4.98%, the highest level since July. Now just 11 bps from a new 18-year high. The U.S. 2 year yield jumps to 3.93%, above the Federal Reserve limit of 3.75%. The last time the Federal Reserve was forced to raise rates into a recession was the 1970s. Yields are exploding higher with the 30Y near multi year highs. The amount of money this will cost the US via the treasuries that need refinancing via the roll is unreal. Markets breaking out above the rates set by the FED. Remember when the admin was screaming at Powell to lower rates to refinance…"
The long-term M-2 money supply chart is for the record books. Note the small recent attempt to bend the curve...
Powell's favorite indicator - the price index for services excluding housing - is rising by 0.3% month-on-month and 3.5% year-on-year, showing steady 3-4% growth per year. In fact, to the steady inflation of 3%+, which the Fed has not yet brought back to target values due to its "dovishness", are added shocks from tariffs and energy prices, forming a stagflationary agenda. As we reported yesterday, the Fed and US Treasury are stepping on the road of emission - Fed Balance turns North again, and the US M2 money supply is keep raising:
Well, we can say that the main intrigue of the last two months has been resolved - the money supply has indeed accelerated in the US due to rising energy prices. And this is just March. Moreover, the growth of the money supply in March was as high as 2%, which is terrifying in annual terms if you calculate it. By the end of May, we'll see what happened in April, when oil prices rose even more. Moreover, it's interesting to see why the S&P 500 hit a new all-time high in the first days of April and what fueled it.
Obviously, this is not the Fed's actions, because their assets did not accelerate the growth. That is, the money is being multiplied by the banking sector. And probably that's why financial assets haven't fallen. But the most interesting thing will start when the prices of oil/LNG/fertilizers (costs) finally start to decline. Just like after the lockdowns, when money was hoarded, but the supply chains hadn't recovered yet and the costs in the system were high. That is, the release of money from oil will start. And the main question is - how many months will new money be created and where will it go. Then, the eager citizens rushed into consumption and pushed prices up. Including the prices of financial assets. Very conveniently, the Clarity Act came out in May, very conveniently.
On May 11, the Trump administration will start refunding tariffs amounting to $166 billion, which were deemed illegal, in accordance with a court ruling. So far, only 21% of import declarations have been processed. It's all happening one after the other. A series of fortunate coincidences. Exactly when the money supply started growing amid rising commodity prices, and practically everyone wrote that inflation would accelerate, as money should start flowing back from the budget. Naturally, increasing the budget deficit and borrowing. That is, it's also in favor of growing money supply and some kind of stimulus.
The average inflation for companies producing food and beverages increased by +7.9% year-on-year in March, which is the biggest jump in the last 12 months.
This is +373 basis points more than +4.2% in February.
Speaking about recent GDP data - 75% of total growth is due to investments in AI...
CONCLUSIONS
In short-term perspective our suggestion is confirmed. Gold will remain under pressure. Stagflation expectations are raising, which will force the Fed to hike the rate. At least this looks like this for now. And at first stage of the process, gold will get a painful punch. But the truth is the Fed can't hold high rates too long. This will have vital impact not only on economy where money will be too expensive but also on a budget deficit. This combination after some time will lead to the moment when real rates will start to decrease that will be supportive to gold.
It is confirmed by the fact that now we see that gold doesn't behave as it should to, moving unusually closely with equities and even volatile crypto. It means that the major driver for the gold is not its own supply/demand expectations but external fiscal factors - mostly liquidity, that we mentioned above.
Gold ETF flows continue to show weekly outflows… not exactly the backdrop for a sustained move higher
In longer term, the news about the UAE leaving OPEC might not seem related to gold, but it actually concerns it as well. The UAE was among the main hubs for trading African gold. No matter how the American-Iranian war ends, it is clear that there will be no return to the old times. That means the regional financial center is gone, the gold hub is gone, oil exports are limited, and production is under pressure. In these conditions, the question arises – is the UAE state needed in its current form?
Membership in OPEC is a minor issue. In the medium term, Iran will be in control there, as it is over the entire Arabian Peninsula.
Note that Malaysia and Indonesia have resumed Gold purchases. What we were talking about — treasuries are good and liquid, so that in emergency situations (like now) it's possible to attract dollar liquidity, but gold is a long-term reserve. At the same time, there is clearly a redistribution of trade balances and a rating of those who can afford to accumulate reserves and who can't any more.
All these moments perfectly fits to long-term technical strategy with Volatility Breakout Pattern on monthly chart. It suggests that retracement might be back to 3200$ area before the next leg up starts. Timing is really extended, but we can't do anything with this.
Gold market right now is less sensitive to statistics, although a minor upside reaction on weaker GDP still happened. But mostly is driven by fiscal factors, such as a liquidity, concern over stagflation scenario and results of oil crisis on global consumption. In general, this situation totally fits to our mid term expectations as we discussed it last time.
MARKET OVERVIEW
Gold inched up on Friday, reversing earlier losses of more than 1%, on hopes for a breakthrough to end the Iran war after Tehran submitted a new proposal for negotiations, easing some inflation concerns, but remained on track for a second straight monthly decline as inflation concerns amid the ongoing Iran war clouded the outlook for interest rate cuts.
The US dollar fell against a basket of other currencies, following speculation Japan is intervening in the foreign-exchange market to support the yen.
Oil prices dropped on the news, though they remained on track for weekly gains, continuing to fuel concerns about a global economic slowdown and surging inflation as fuel prices climb. Rising costs could prompt central banks to keep interest rates higher for longer, weighing on non-yielding assets such as gold as investors turn to alternatives like Treasury yields. The U.S. Federal Reserve kept interest rates unchanged this week and struck a hawkish tone that saw markets abandon expectations for a rate cut this year. Axios reported earlier that US military commanders would brief Trump about military options, signaling a resumption of combat operations is under consideration. Iran remained defiant.
Bullion fluctuated between gains and losses, ultimately closing little changed and marking a second consecutive weekly decline. Elsewhere, the dollar erased earlier losses to end the day slightly higher after Trump threatened to hike tariffs on EU-made automobiles. A stronger greenback makes precious metals more expensive for most buyers. Still, most analysts are bullish on the precious metal, with the latest data by the producer-funded World Gold Council showing that central banks added gold holdings in the first quarter at the fastest pace in more than a year.
Central banks added gold holdings at the fastest pace in more than a year in the first quarter, as a slump in prices encouraged a wave of buying that more than offset sales by a handful of institutions. Net official-sector purchases totaled 244 tons in the three months, up from 208 tons in the previous quarter, according to estimates from the World Gold Council, an industry body. But much of the central-bank buying included in the WGC’s figures isn’t disclosed, and not included in International Monetary Fund statistics.
Tether Holdings SA bought more than six tons of gold for its reserves in the first three months of the year, extending a buying streak that’s made it the largest known holder of bullion in the world outside of banks and nation states. The value of the crypto giant’s gold reserves stood at $19.8 billion at the end of March, according to a quarterly report on its holdings, which equates to 132 tons of bullion based on spot prices
The share of gold in India's foreign exchange reserves rose to 16.7% at the end of March, up from 13.92% at the end of September 2025, according to the Reserve Bank of India's half-yearly reserves management report released on Thursday. More than two-thirds of India's gold reserves are now held domestically, data from the central bank showed. Over the past two years, India has brought back a sizeable share of its gold previously held overseas.
The Fed on Wednesday kept rates on hold but raised concerns about inflation. Meanwhile, the Bank of England also kept rates on hold and set out scenarios for the economic impact of the Iran war, one of which could require a "forceful" increase in borrowing costs. Data showed the U.S. Personal Consumption Expenditures Price Index jumped 0.7% last month, the largest gain since June 2022. The increase was in line with economists' expectations.
The Fed held interest rates steady, but in its most divided decision since 1992 noted rising concerns about inflation in a policy statement that drew three dissents from officials who no longer feel the U.S. central bank should communicate a bias towards lowering borrowing costs. Traders stuck to bets the Fed will not cut interest rates this year or well into the next, after the decision. Inflation fears have flared up with global oil prices trading above $100 a barrel due to the U.S.-backed war against Iran.
Analysts at Citi said pressure to sell gold could remain strong in the very near term due to the uncertainty in the Middle East, but expect the metal to eventually regain its appeal as a safe-haven asset. Citi kept its price targets for gold unchanged at $4,300 for the next three months and $5,000 for the 6-to-12-month window.
Analysts have raised their annual gold price forecasts, a Reuters poll showed on Monday, with strong central bank demand and economic uncertainty expected to offset risks from surging inflation and hawkish policy bets. The survey of 31 analysts and traders conducted over the past three weeks returned a median gold forecast of $4,916 per troy ounce for 2026.
On silver, analysts expect the metal to average $78 per ounce in 2026.
DEUTSCHE BANK ABOUT GEOPOLITICS
So at least one question is: will this build up in gold reserves continue? And this is where an interesting new piece of research by Mallika Sachdeva and Michael Hsueh, also at Deutsche Bank, comes in. Spoiler alert: they reckon that yes, it will probably continue. Sachdeva and Hsueh look at the history of central bank gold reserves and it tells a fascinating story.
The writers note that the real turning point for gold came in the 1990s, not the 1980s. Right up until then, the share of global central bank reserves held in gold had “consistently been a larger share of reserves than the fiat dollar.” In other words, central banks held more gold than they did dollars. So what changed? Geopolitics. The Berlin Wall fell. The Japanese bubble burst. The US was left as the undisputed global hegemon. On top of that, the country had strong public finances, and inflation was under control.
This, in turn, made US Treasuries a very attractive alternative to gold. As a result, developed market central banks began to sell gold. Meanwhile, the march of trade and globalization meant that emerging market central banks built up large US dollar reserves from export revenues. As a result of all this, the value of global central bank reserves held in gold fell from about 40% in the late 1980s, to just 10% by the time of the global financial crisis in 2008.
Looked at through this lens, the key driver of the switch was not gold’s decoupling from the official global monetary system. Instead, calmer geopolitics and rapid growth in trade under a relatively benign single superpower led to the US dollar being the most desirable and convenient reserve asset to hold. Put it this way, and you start to see how this could go into reverse.
After all, geopolitics is only getting messier by the day, and while the idea of “de-globalization” is a complex topic, 2008 was a turning point, and the global trade outlook certainly isn’t forging ahead. So the rationale for US dollar reserve dominance is no longer as clear. And we’re already seeing a shift as a result. Since the financial crisis, emerging market central banks have been steady buyers of gold. They have bought around 225 million troy ounces over the past 17 years, notes Deutsche. This is more than was sold by the developed market central banks in the 1990s.
We’re now at a point where the higher volumes of gold reserves, combined with the surge in the value of those reserves, mean that gold’s share of global central bank reserves has doubled in the past four years and now stands at nearly 30%. The US dollar’s share has dropped from an early 2000s peak of around 60% to around 40% now.
So what happens next? Well, the Deutsche Bank team reckons there’s some way to go. For a start, prior to the 1990s — which in this model, looks like the outlier period, rather than a brave new era — gold’s share of global central bank reserves fluctuated between 40% and 70%. That means there’s at least another 10% to go in order to “revert to the mean”. The US has long since decided that being the global hegemon is a role it’s less keen to maintain under current conditions, it’s hard to see why an appetite for diversification among emerging central banks would lessen.
In short, if gold is on its way back as a reserve asset — and this framework implies that it never really went away, just that the 1990s was indeed an unusual and marvelous decade — then the bull market should have legs.
BIG DECISION
Oil back above $120, wheat surging, and long-term inflation expectations hitting fresh highs are sending a clear signal: price pressures are re-accelerating. At the same time, rising bond yields are sharply increasing the cost of refinancing government debt, creating a growing tension between markets and policymakers. The bond market is yelling from the rooftops that inflation is about to soar, while Long term inflation expectations just jumped to two year highs.
US wheat prices are surging. Prices have risen +30% since the start of the year, driven by persistent drought across the US Plains farming region and soaring fertilizer costs. Gas prices in the US have moved up to $4.23 per gallon, their highest level since August 2022. The 42% spike over the last 9 weeks ($2.98/gallon to $4.23/gallon) is the biggest we've seen in the past 30 years. 30-Year Treasury Yield closed at 4.98%, the highest level since July. Now just 11 bps from a new 18-year high. The U.S. 2 year yield jumps to 3.93%, above the Federal Reserve limit of 3.75%. The last time the Federal Reserve was forced to raise rates into a recession was the 1970s. Yields are exploding higher with the 30Y near multi year highs. The amount of money this will cost the US via the treasuries that need refinancing via the roll is unreal. Markets breaking out above the rates set by the FED. Remember when the admin was screaming at Powell to lower rates to refinance…"
The long-term M-2 money supply chart is for the record books. Note the small recent attempt to bend the curve...
Powell's favorite indicator - the price index for services excluding housing - is rising by 0.3% month-on-month and 3.5% year-on-year, showing steady 3-4% growth per year. In fact, to the steady inflation of 3%+, which the Fed has not yet brought back to target values due to its "dovishness", are added shocks from tariffs and energy prices, forming a stagflationary agenda. As we reported yesterday, the Fed and US Treasury are stepping on the road of emission - Fed Balance turns North again, and the US M2 money supply is keep raising:
Well, we can say that the main intrigue of the last two months has been resolved - the money supply has indeed accelerated in the US due to rising energy prices. And this is just March. Moreover, the growth of the money supply in March was as high as 2%, which is terrifying in annual terms if you calculate it. By the end of May, we'll see what happened in April, when oil prices rose even more. Moreover, it's interesting to see why the S&P 500 hit a new all-time high in the first days of April and what fueled it.
Obviously, this is not the Fed's actions, because their assets did not accelerate the growth. That is, the money is being multiplied by the banking sector. And probably that's why financial assets haven't fallen. But the most interesting thing will start when the prices of oil/LNG/fertilizers (costs) finally start to decline. Just like after the lockdowns, when money was hoarded, but the supply chains hadn't recovered yet and the costs in the system were high. That is, the release of money from oil will start. And the main question is - how many months will new money be created and where will it go. Then, the eager citizens rushed into consumption and pushed prices up. Including the prices of financial assets. Very conveniently, the Clarity Act came out in May, very conveniently.
On May 11, the Trump administration will start refunding tariffs amounting to $166 billion, which were deemed illegal, in accordance with a court ruling. So far, only 21% of import declarations have been processed. It's all happening one after the other. A series of fortunate coincidences. Exactly when the money supply started growing amid rising commodity prices, and practically everyone wrote that inflation would accelerate, as money should start flowing back from the budget. Naturally, increasing the budget deficit and borrowing. That is, it's also in favor of growing money supply and some kind of stimulus.
The average inflation for companies producing food and beverages increased by +7.9% year-on-year in March, which is the biggest jump in the last 12 months.
This is +373 basis points more than +4.2% in February.
Speaking about recent GDP data - 75% of total growth is due to investments in AI...
CONCLUSIONS
In short-term perspective our suggestion is confirmed. Gold will remain under pressure. Stagflation expectations are raising, which will force the Fed to hike the rate. At least this looks like this for now. And at first stage of the process, gold will get a painful punch. But the truth is the Fed can't hold high rates too long. This will have vital impact not only on economy where money will be too expensive but also on a budget deficit. This combination after some time will lead to the moment when real rates will start to decrease that will be supportive to gold.
It is confirmed by the fact that now we see that gold doesn't behave as it should to, moving unusually closely with equities and even volatile crypto. It means that the major driver for the gold is not its own supply/demand expectations but external fiscal factors - mostly liquidity, that we mentioned above.
Gold ETF flows continue to show weekly outflows… not exactly the backdrop for a sustained move higher
In longer term, the news about the UAE leaving OPEC might not seem related to gold, but it actually concerns it as well. The UAE was among the main hubs for trading African gold. No matter how the American-Iranian war ends, it is clear that there will be no return to the old times. That means the regional financial center is gone, the gold hub is gone, oil exports are limited, and production is under pressure. In these conditions, the question arises – is the UAE state needed in its current form?
Membership in OPEC is a minor issue. In the medium term, Iran will be in control there, as it is over the entire Arabian Peninsula.
Note that Malaysia and Indonesia have resumed Gold purchases. What we were talking about — treasuries are good and liquid, so that in emergency situations (like now) it's possible to attract dollar liquidity, but gold is a long-term reserve. At the same time, there is clearly a redistribution of trade balances and a rating of those who can afford to accumulate reserves and who can't any more.
All these moments perfectly fits to long-term technical strategy with Volatility Breakout Pattern on monthly chart. It suggests that retracement might be back to 3200$ area before the next leg up starts. Timing is really extended, but we can't do anything with this.
