Gold’s Demand Record Clashes With Sharpest Weekly Drop in Months
Published on 05/16/2026 at 12:33 | Redaktion boerse-global.de
The gold market is speaking in two voices right now. Physical buying hit an all-time high in the first quarter, yet the price just suffered its steepest weekly decline in recent memory. The LBMA fix closed Friday at $4,535.37 an ounce, down 2.5% on the day and nearly 4% over the week—a loss of roughly $214 per ounce.
The disconnect stems from a rare convergence of headwinds that have overwhelmed even the most bullish fundamentals. US inflation data for April came in at 3.8%, the hottest reading since May 2023, effectively extinguishing hopes for early rate cuts. Markets are now pricing a possible rate hike before December. That shift has sent the yield on 10-year Treasuries as high as 4.54% and lifted the dollar, making gold more expensive for international buyers and reinforcing the sell-off.
Geopolitical tensions in the Middle East have added to the pressure by driving oil prices higher, which in turn stokes inflation risks and pushes bond yields up further. For a non-yielding asset, that is a particularly toxic combination.
India’s tariff shock hits where it hurts most
The most abrupt blow came from New Delhi. Prime Minister Narendra Modi’s government reintroduced a 15% import duty on gold and layered on a 3% sales tax, part of an effort to shore up the rupee amid regional instability. India is one of the world’s largest physical gold consumers, and the market reaction was immediate. Local prices sank to a record discount of more than $200 relative to London benchmarks, effectively freezing a major channel of demand.
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A political signal from Washington adds another layer
Across the Atlantic, the “Bitcoin Act of 2025” is gaining traction among US lawmakers. The bill proposes a revaluation of America’s gold reserves, which are still carried on the books at the 1973 price of $42.22 per ounce. Any gains from such a revaluation would be earmarked for a strategic Bitcoin reserve. While implementation is uncertain, the signal itself has rattled speculative investors: the world’s largest sovereign gold holder is openly contemplating a shift toward digital assets.
US gold ETFs, however, tell a different story. Long-term investors added 67,571 ounces in the last trading session, valued at roughly $316.8 million, suggesting that some participants view the rout as a buying opportunity.
Record physical demand provides a floor—for now
First-quarter global gold demand hit a record 1,230 tonnes, driven by net central bank purchases of 244 tonnes as reserve managers diversify away from the dollar. Yet this structural support has been unable to counterbalance the immediate drag from rising rates, a stronger dollar, and the loss of Indian buying.
Speculative interest has evaporated. Open interest on the COMEX slumped to a 16-year low in April, starving the futures market of liquidity. This is the same mechanism that accelerated the slide: with fewer leveraged positions, any sell-off feeds on itself.
Analysts split between near-term pain and long-term optimism
The technical picture has turned fragile. Gold breached its short-term uptrend line and slipped below the 50-period moving average. The intraday low on Friday touched $4,507.41 before a partial recovery. The next support lies at $4,500, with a break below that exposing the $4,420 area. The Relative Strength Index is signaling oversold conditions, but momentum has yet to confirm a reversal.
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LiteFinance sees further downside toward $4,300. J.P. Morgan, by contrast, holds a year-end 2026 target above $5,000, and TD Securities expects new highs in the first half of next year.
The London morning auction on Monday will be the first real test. A hold above $4,500 could trigger a countermove toward $4,650. A clean break below it would extend the selling pressure. For now, the market is caught between a record physical bid and an equally record set of macro headwinds.
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