Gold Poised for Third Weekly Gain Amid Iran Truce Hopes and Central Bank Demand

SINGAPORE/LONDON — Gold is on track for its third straight weekly gain, buoyed by cautious optimism over potential de-escalation in the Middle East and unwavering demand from global central banks, even as inflationary headwinds persist.

The spot price hovered around $4,765 per ounce on Friday, poised for a weekly increase of nearly 2%. Market focus has shifted to high-stakes weekend negotiations in Islamabad, where a U.S. delegation led by Vice President JD Vance is set to engage with Iranian officials. The outcome could significantly influence safe-haven flows. Concurrently, traders are bracing for the latest U.S. inflation report due later today.

President Donald Trump expressed optimism about a deal to end the six-week conflict but later issued a warning to Tehran regarding transit fees in the Strait of Hormuz. Meanwhile, renewed Israeli strikes in Lebanon have threatened a fragile ceasefire brokered earlier this week, underscoring the region's volatility.

"The market is caught between two powerful narratives," said Marcus Thorne, a veteran commodities strategist at Veritas Capital in London. "The prospect of peace is tempering the extreme fear premium, but the structural demand from official institutions provides a solid floor. It's a tug-of-war between geopolitics and macroeconomics."

Supporting gold, the U.S. dollar index has softened this week, and oil prices are headed for their steepest weekly decline since June. However, bullion remains nearly 10% lower since the conflict began in late February, as some investors were forced to liquidate gold holdings to cover losses in other asset classes.

The war-induced energy shock continues to stoke inflation fears, leading markets to price in delayed or even additional central bank rate hikes—a traditional negative for non-interest-bearing gold. Yet, analysts note a countervailing force: a prolonged conflict could ultimately stifle global growth, potentially forcing a pivot toward easier monetary policy later.

Minutes from the Federal Reserve's recent meeting revealed policymakers are grappling with these dual risks. "Any prediction starts with a call on the war," noted Kyle Rodda, an analyst at Capital.com. "If a sustainable peace deal is reached and inflation is contained, gold recovers. If things fall apart, significant downside risk remains."

Demand from central banks, a key pillar of support, shows no sign of abating. Poland's central bank reaffirmed its goal to boost reserves to 700 tons, while China added approximately 5 tons in March—its largest monthly purchase in over a year, taking advantage of lower prices. ANZ Banking Group analysts suggest recent price dips will likely incentivize further official-sector accumulation, forecasting central bank buying to reach around 850 tons in 2026.

Market Reaction: Spot gold was virtually flat at $4,766.30 an ounce by late afternoon in Singapore. Silver gained 0.9% to $76.03. Platinum fell 1.5%, while palladium edged higher. The Bloomberg Dollar Spot Index rose modestly by 0.1%.

Trader Perspectives

Sarah Chen, Portfolio Manager, Global Macro Fund (Hong Kong): "The central bank buying is the unsung hero here. It's a strategic, long-term shift in reserve management that's largely decoupled from short-term rate expectations. This provides a structural bid that wasn't as prominent in previous cycles."

David Miller, Independent Precious Metals Trader (New York): "This is a classic 'hope rally' that's ignoring the inflationary elephant in the room. The Fed is backed into a corner. If they cut because growth stumbles, inflation runs hotter. If they hold or hike, they risk breaking something. Gold might be rising now, but the volatility ahead is being severely underestimated."

Eleanor Vance, Economics Professor (Chicago): "The data is telling a nuanced story. Yes, persistent inflation is a challenge, but the pre-war slowdown in consumer spending and the potential for a war-induced growth shock complicate the Fed's calculus. Gold's role as a diversifier in institutional portfolios is being reassessed and reinforced."

Raj Patel, Retail Investor Forum Moderator (Online): "It's utterly frustrating! The headlines push the price on every rumor, but the core issues—massive debt, currency debasement, and geopolitical fragmentation—aren't going away. This pullback was a gift. Physical accumulation on dips is the only strategy that makes sense in this manipulated paper market."