Near-term gold outlook cloudy amid yield spike, dollar headwinds: Analyst

Gold slides as Hormuz crisis drives hawkish rate repricing

Spot gold is currently trading near $4,480, its lowest level since March, having shed roughly 6 per cent from last Monday's $4,730 as a sweeping hawkish macro repricing, increasingly traced to the US-Iran conflict, continues to weigh on the metal. The dollar index has climbed over 1 per cent to around 99.4, hovering near a six-week high, closing off one of gold's most reliable support pillars.  

For MCX, however, the picture diverges sharply, domestic gold prices are up around 3 per cent since last week, following India's decision to double gold import duties from 6 per cent to 15 per cent effective May 13, a move aimed at defending the rupee and containing the swelling import bill amid the ongoing West Asia crisis. 

 

The macro pressure on international gold has been building since last Tuesday. With diplomatic efforts stalled and the Strait of Hormuz remaining largely closed, crude oil prices have stayed elevated, reinforcing a higher-for-longer rate narrative that has proven deeply unfavourable for the non-yielding metal. US consumer prices rose 3.8 per cent in April, the highest reading since May 2023, while wholesale inflation accelerated at its fastest pace since 2022, both driven substantially by energy cost pressures stemming from the Hormuz disruptions. Fed commentary amplified the hawkish tilt further, with several regional presidents reiterating that containing inflation remained the priority, and some declining to rule out additional rate hikes if price pressures persist. 

The bond market's response has been severe. The 10-year Treasury yield surged to a 16-month high of 4.7 per cent on Tuesday, while the 30-year bond climbed to an 18-year high of 5.2 per cent, a dramatic repricing that reflects markets fully pricing out near-term easing. CME FedWatch now shows a 40 per cent probability of a rate hike by year-end, with cuts ruled out entirely for 2026. Rising real yields alongside a firmer dollar have together stripped two of gold's most consistent supports simultaneously. 

Until the Strait of Hormuz fully reopens and energy prices begin to ease meaningfully, inflation pressures are likely to remain elevated, limiting the Federal Reserve's ability to shift toward accommodation. Markets are also awaiting this week's FOMC minutes for further clarity on the policy trajectory. In that environment, gold faces a difficult near-term path, any diplomatic breakthrough that eases energy prices and softens the inflation outlook could quickly shift the calculus, but until that happens, the rate and dollar headwinds remain firmly in charge. 

Gold futures continue to trade in an Inside bar candle, but the overall structure remains sideways to bullish as prices hold above the key support zone near 154,200–154,900. The recent breakout above the falling trendline indicates improving momentum, while RSI is also supporting positive bias. Immediate resistance is placed around 160,300–164,300 levels, where profit booking may emerge. If prices sustain above the support region, dips are likely to attract fresh buying interest.  

Traders may prefer a “buy on dips” strategy instead of chasing higher levels. A decisive close above 160,300 could further strengthen bullish momentum in the coming sessions. Persistent fiscal deficits across major economies, a fragmented geopolitical landscape, and continued strategic diversification away from fiat assets by central banks and institutional investors provide durable structural support, but near term, risk management takes priority over conviction positioning in a high-volatility environment. 

(Disclaimer: This article is by Kaynat Chainwala, AVP - Commodity Research, Kotak Securities. Views expressed are her own.)