Gold spent the third week of May trading on either side of $4,500 an ounce, with the metal swinging on every shift in US-Iran negotiations and weekly inflation prints. By Friday May 22, bullion was on track for a second consecutive weekly decline as elevated oil prices renewed inflation worries and pushed traders to price in roughly a 55% chance of a Federal Reserve rate hike of at least 25 basis points by October. Earlier in the week, gold had climbed toward $4,600 on optimism that a US-Iran deal could reopen the Strait of Hormuz, release frozen Iranian assets, and pave the way for further nuclear talks.
Those gains evaporated mid-week. Tehran said the latest US proposal had partly closed the gap between the two sides, but reports that Iran's Supreme Leader ordered the country's enriched uranium stockpile to remain inside Iranian borders complicated the negotiations. Iran is also reportedly discussing a permanent toll system with Oman that would formalize Tehran's control over Strait of Hormuz traffic, an idea President Donald Trump rejected. Fed Governor Christopher Waller added pressure by signalling he no longer favoured the central bank maintaining an easing bias.
Despite the recent retreat, gold remains structurally well bid. The LBMA PM gold price set a fresh quarterly average record of $4,873 an ounce in the first quarter of 2026, with the intraday peak of $5,405 reached in January before a correction. Central banks bought a net 244 tonnes in the first quarter, up 3% year on year. Bar and coin demand jumped 42% to 474 tonnes, the second-highest quarterly total on record. Technology demand rose 1% to 82 tonnes, helped by continued AI infrastructure build.
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Goldman Sachs reiterated its $5,400 year-end target on May 19, with the bank's analysts pointing to ongoing central bank diversification away from dollar assets and rising debasement hedging by high-net-worth investors. J.P. Morgan's outlook projects average quarterly investor and central bank demand of 585 tonnes through 2026, with 755 tonnes of central bank buying for the year. Capital Economics sits at the more cautious end of the spectrum, forecasting a drop toward $3,500 by end-2026 if the speculative bid fades.
For procurement teams in jewellery fabrication, electronics, and dentistry, the takeaway is that elevated input costs are likely to persist into the second half of the year. Hedging programmes should account for $4,500 floor support but also for headline-driven swings of $100 or more per ounce on Iran developments. Refiners exposed to recycled material flows are seeing supply rise 5% on year as higher prices pull scrap into the system.
Team Lead - Market Research
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