Gold extended its retreat on Friday, with spot prices falling to $4,519.85/oz as improving prospects for a US-Iran peace deal continued to deflate the safe-haven premium that sent the metal to its all-time high earlier this year. Futures on the COMEX traded at $4,730.70, reflecting the broader unwind of geopolitical risk pricing that had built up since the escalation in the Strait of Hormuz.
The sell-off accelerated after US Secretary of State Marco Rubio described the atmosphere of ongoing negotiations as containing "some encouraging signs," while Pakistani mediators arrived in Tehran to facilitate an outline agreement. Markets interpreted the diplomatic activity as the clearest signal yet that a framework for de-escalation may be taking shape, directly pressuring gold's risk premium.
(FACT: FXStreet, May 22) — Gold consolidated within its weekly range on Thursday as traders weighed the prospect that a Hormuz reopening could sharply reduce inflationary pressure. If the Strait of Hormuz returns to normal operations, oil prices would likely decline significantly, easing one of the primary drivers of sticky inflation that has kept monetary policy tight globally.
The Federal Reserve's latest meeting minutes, released earlier this week, showed that most officials believe a rate hike could be warranted if inflation remains stubbornly above the 2% target (FACT: GoldRepublic, May 21). However, analysts note that an Iran deal that pushes oil and shipping costs lower would give the Fed room to pivot toward rate cuts — a scenario that would be supportive for gold, though initially the metal is trading on the removal of the war premium rather than on the monetary policy outlook.
Central bank demand continues to provide a structural floor under prices. The World Gold Council reported Q1 2026 net purchases of 244 tonnes, with Poland adding 31t, Uzbekistan 25t, and China 7t (FACT: Reuters, May 22). At roughly 800 tonnes per year, official-sector buying remains well above the pre-2022 trend, insulating gold from a complete collapse even as speculative flows retreat.
Physical demand in Asia tells a more cautious story. In India, the world's largest gold-consuming nation, dealers are offering steep discounts as price volatility keeps buyers on the sidelines. Chinese premiums, which had been elevated during the rally, are now easing as import demand normalizes (FACT: Reuters, May 22). The combination of rich spot prices and unpredictable swings has pushed the physical market into a wait-and-see posture.
Gold currently trades 14% below its pre-conflict peak of roughly $5,250 and 17% below the all-time high of $5,477.79 recorded during peak panic in January. The 52-week low of $3,261.49 underscores just how dramatic the year's price action has been. With the 52-week range spanning more than $2,200 from low to high, the yellow metal remains in a historically volatile regime — one that will ultimately be resolved by whether the Hormuz negotiations produce a lasting peace or collapse back into confrontation.
The $4,500 area is the key technical battleground. If peace talks solidify, gold could test support at the $4,200-$4,300 zone where central bank buying historically steps in aggressively. Commercial buyers should watch the Hormuz talks as the primary price catalyst over the next 1-2 weeks. A deal that reopens the strait would remove the war premium entirely, potentially pushing gold toward $4,000. But failure would send it straight back above $5,000. With 244 tonnes of central bank buying already in Q1, official-sector demand provides a meaningful price floor — but at current levels, waiting for clarity on the diplomatic front carries significant upside risk for those who delay coverage too long.