Gold has fallen today to around $4,560 due to inflation risks and the geopolitical conflict in the Middle East.

Most likely, by the end of the week, gold will lose more than 2%. April inflation data from the US came in worse than expected: the producer price index accelerated to its highest level since 2022, and consumer prices increased the most since 2023. The markets reacted predictably: the dollar strengthened, and the yield on 10-year Treasury bonds surged, putting pressure on gold from two sides—as a non-yielding asset and a dollar-denominated one.

The Strait of Hormuz remains effectively closed, negotiations for the Iranian settlement have stalled, and WTI crude oil is trading around $102 per barrel. The energy crisis is dragging on, and inflation remains high, limiting the Federal Reserve's room for maneuver.

It seems that inflation expectations, rising yields, and a strengthening dollar will continue to exert short-term pressure on gold. Since the beginning of the war, gold has depreciated by more than 12% and has been trading within a relatively narrow sideways range. Investors find themselves caught between two fires: inflation risks indicate a future rise in interest rates, which puts pressure on the metal, while concerns about a slowing economy theoretically suggest easing policies that could support gold.

However, it is too early to completely write off gold. Hedge funds may start to increase long positions in the coming days—especially in light of the sharp drop in prices. China is currently doing just that, actively buying gold on the dips.

Silver, in this context, looks considerably better: during May, the metal has appreciated by about 11% on a wave of renewed speculative interest in industrial metals. The gold-to-silver ratio has decreased, signaling the relative cheapness of silver.

I want to remind you that an additional negative factor for the market this week has been India, which has further tightened the rules for gold imports as part of efforts to protect the rupee. This occurred just days after the increase in import duties and impacted demand in the world's second-largest precious metals market.

Regarding the current technical picture for gold, buyers need to reclaim the nearest resistance at $4,607. This will allow them to aim for $4,656, above which it will be quite challenging to break through. The furthest target will be $4,708. In the event of a decline in gold, bears will attempt to take control at $4,546. If they succeed, breaking through this range will deliver a severe blow to the bulls' positions and push gold down to a low of $4,481 with the potential to reach $4,432.