Between the Strait of Hormuz and US retail data, where is gold heading?

Gold prices saw a notable decline, falling below the $4,800 level to around $4,775 during the Asian session at the start of the trading week.

At first glance, this move appears contradictory given the escalating geopolitical tensions in the Strait of Hormuz, one of the world’s most critical trade arteries.

In my view, however, this decline does not reflect a fundamental weakness in gold’s status as a safe haven, but rather reveals a more complex shift in market dynamics, where geopolitical factors alone are no longer sufficient to drive prices higher in a restrictive monetary environment.

The renewed closure of the Strait of Hormuz and Iranian authorities’ warning vessels to stay away represent a serious escalation that would traditionally push investors toward gold immediately. Yet, the market reaction this time has been different.

I interpret this as investors becoming more sensitive to U.S. interest rate policies than to geopolitical developments. With expectations that interest rates will remain elevated for longer, holding gold—which yields no return—becomes less attractive compared to interest-bearing assets. Therefore, I believe the key factor now is not the level of risk itself, but the opportunity cost of holding gold.

Political developments between the United States and Iran, including Tehran’s denial of entering new peace talks, reflect a state of strategic uncertainty that typically supports gold. However, I believe markets now view these tensions as “chronic” rather than sudden shocks, which reduces their immediate impact on prices. In other words, geopolitical risks have not disappeared, but they are already partially priced in, limiting their ability to trigger strong upward moves in gold as seen in the past.

From another angle, the shift in expectations regarding U.S. monetary policy plays a central role in explaining this decline. With ongoing inflationary pressures, markets are adopting a “higher for longer” interest rate scenario, which supports the U.S. dollar and puts pressure on gold. In my view, this dynamic will persist in the near term, with gold remaining under pressure as long as there are no clear signs of easing inflation or a shift in the Federal Reserve’s stance toward monetary easing.

Attention is now turning to U.S. retail sales data for March, which is expected to show growth of 1.3% compared to 0.6% in February. In my opinion, this data will be a decisive test for the market’s short-term direction. If the figures come in strong, it will reinforce expectations of continued monetary tightening, potentially pushing gold into further correction. Conversely, weaker-than-expected data could lead to a softer dollar and a return of bullish momentum for gold, especially amid ongoing geopolitical tensions.

I also believe the market is undergoing a broad “repricing” phase, where assets are being evaluated not only based on risk but also on real return expectations. In this context, gold is temporarily declining because it does not keep pace with rising yields. However, this does not mean it has lost its strategic role. On the contrary, I see any further decline as a potential medium-term buying opportunity, particularly if tensions in the Middle East persist or signs of a global economic slowdown emerge.

It is also important to note that institutional investor behaviour has changed. The move toward gold is no longer automatic during crises; instead, it has become more selective and better timed. This reflects a greater level of market maturity, but at the same time makes gold movements more complex and less predictable. In my view, this shift requires investors to rethink traditional models used to interpret gold price movements.

In light of all the above, I expect gold to remain volatile in the near term, with a limited downward bias as long as U.S. interest rates stay high. However, over the medium term, I believe the supportive factors for gold—ranging from geopolitical tensions to economic risks—remain intact and could return prices to an upward trajectory once the balance between yields and risks shifts. Therefore, the current decline should not be interpreted as a structural weakness, but rather as a temporary correction within a broader trend that still holds significant investment opportunities.