Gold Outlook: $5,000 Key Level in Focus as Geopolitics and Fed Meeting Drive Markets

Over the past week, Middle East tensions have continued to escalate, yet gold—a traditional safe-haven asset—has struggled to rally and has instead retraced.

Persistent high oil prices have reignited inflation concerns, delaying expectations for Fed rate cuts. Against a backdrop of heightened risk asset volatility, some highly leveraged long positions were forced to liquidate, adding short-term selling pressure. These two forces combined to weigh on gold.

Nevertheless, geopolitical uncertainty remains, and structural demand from institutional investors and central banks has helped limit the downside.

This week, in addition to monitoring geopolitical developments, traders are closely watching the FOMC meeting and comments from Powell, as signals on the rate-cut path could further impact gold prices.

Technical Observation: $5,000 as a Critical Pivot

Looking at the XAUUSD daily chart, gold failed to break $5,250 resistance last week and began a three-day consecutive pullback from Wednesday. Prices fell below the $5,100 support and tested $5,000 on Friday, marking the second week of losses.

In Monday’s early session, gold briefly fell below $5,000, hitting a near one-month low of $4,967. The $5,000 level now stands as a key short-term pivot. 

If this level is decisively breached, gold could retreat further toward the $4,850–$4,900 support zone. Conversely, if gold stabilizes here, the next resistance levels to watch remain $5,100 and $5,250.

Dollar Strength and Leveraged Liquidations Pressuring Gold

Despite escalating Middle East tensions, gold has not gained a noticeable safe-haven boost. The key reason is a shift in macro pricing logic: the market focus has moved from “safe-haven demand” to “inflation and interest rates.”

Reports suggest that Trump is “weighing” seizing Iran’s Kharg Island oil facilities, which handle roughly 90% of Iran’s oil exports and are central to its energy system. Control over this node would effectively choke Iran’s oil revenue. Combined with continued disruptions in the Strait of Hormuz, concerns about prolonged global oil supply interruptions have intensified.

Yet, in the current risk-off environment, inflation pressures from rising oil prices have paradoxically weighed on gold. Recent U.S. economic data shows signs of stagflation, and sustained high energy prices have prompted a reassessment of the Fed’s rate-cut path.

Hawkish rate pricing has pushed up real yields and strengthened the dollar. Last Friday, the DXY surged past 100, hitting a nearly 10-month high and posting its largest weekly gain in about 18 months. Since gold is priced in dollars, a stronger currency naturally weighs on gold.

Additionally, with significant selling pressure across risk assets, including U.S. equities, risk-off dynamics have accelerated. Some leveraged long positions were forced to liquidate, and margin calls further amplified short-term downward pressure on gold.

Institutional Holdings and Central Bank Purchases Provide a Floor

Despite the pullback, gold’s losses have been relatively modest. Beyond ongoing geopolitical uncertainty, institutional flows and central bank buying continue to provide structural support.

Over the past week, gold fell, but SPDR Gold ETF holdings remained stable above 1,070 tonnes, indicating institutions have not significantly reduced positions amid short-term volatility.

Meanwhile, the People’s Bank of China has increased its gold holdings for 16 consecutive months through February. Persistent central bank demand, combined with lingering concerns over U.S. fiscal deficits, continues to provide long-term support for gold.

Watching Geopolitics and the Fed

Overall, gold faces increased near-term downside pressure. While traditionally a hedge against uncertainty, high oil prices and stagflation fears have suppressed demand as some investors prefer higher-yielding dollar assets over non-interest-bearing gold.

Still, stable institutional holdings, ongoing central bank purchases, and geopolitical uncertainty have limited further downside. In the absence of major catalysts, gold has a greater probability to remain range-bound near current highs rather than trend sharply lower.

This week, traders will focus on both geopolitical developments and the FOMC meeting.

Geopolitically, if the U.S. were to take action to seize Kharg Island, it could represent a major escalation, potentially involving more ground forces and triggering wider regional retaliation. In such a scenario, gold volatility is likely to increase significantly.

Regarding the FOMC meeting, market attention will center on whether surging oil prices alter the inflation trajectory. If the dot plot indicates fewer rate cuts this year, or the Fed signals a more hawkish stance, emphasizing sustained high rates, gold prices could remain under near-term pressure.